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Australian Dollar Gains on Jobs Data Beat, Will AUD/USD Rally Continue?

Australian Dollar Gains on Jobs Data Beat, Will AUD/USD Rally Continue?

Daniel McCarthy,

Australian Dollar, AUD/USD, Jobs Report, COVID-19, RBA – TALKING POINTS:

  • Australian unemployment rate improving despite Covid Delta variant spread
  • The Australia Dollar reaction was meek as it struggled to sustain the rally
  • Can AUD/USD remain resilient when RBA likely to remain accommodative?

The Australian Dollar found some support immediately after the release of better than expected jobs data. Australia’s unemployment rate came in a 4.6% versus 4.9% prior, the markets were expecting an increase to 5%. However, AUD/USD then failed to follow through as USD strength continued to dominate markets.

Today’s unemployment number comes on the back of soft economic data out of Australia, with the latest building approvals and retails sales prints underwhelming. Although headline CPI is above the target range, the RBA’s preferred measure of inflation, the trimmed mean, printed to the low side. This will likely give the central bank time to maintain loose policy in the face of uncertainty around the extent of the spread of the Delta variant.

The RBA noted in their last meeting minutes that employment will continue to face headwinds in light of the Delta variant into the September quarter. The full impact of lockdowns are not included in the July data.

Earlier, the ASX 200 Index opened weaker after a second down day for US equities. This is as fading iron ore and copper prices also placed further downside pressure on the commodity-linked AUD. After the data, the currency pair tried to get off the recently set lows for the year. However, it seems to have not been sustained, maintaining the dominant downtrend.

AUD/USD TECHNICAL ANALYSIS – RANGE TRADE OR BREAKOUT FOR AUD?

AUD/USD is testing the trend line support and has downside momentum. The 100-day moving average recently crossed above the 200-day line, which is also known as a ‘Death Cross’. This is historically seen as a strong signal for long-term downward momentum. The 200-day moving average is currently flat, but a down day will likely turn its gradient south. The short-term momentum signal of the 21-day moving average (which represents the total active trading days in a typical month) has been pointing down for some time but is starting to decelerate.

AUD/USD DAILY CHART

Australian Dollar Gains on Jobs Data Beat, Will AUD/USD Rally Continue?

Chart created with TradingView

AUD/USD TRADING RESOURCES

--- Written by Dan McCarthy, Strategist, APAC for DailyFX

To contact Dan, use the comments section below or @DanMcCarthyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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