A mixed data set tends to result in mixed price action
With the employment change being too volatile to establish meaningful trends it is always the unemployment rate which attracts the attention. Today’s print of 6.3% was above the 6.1% forecast but the trend also needs to be taken into consideration. The RBA had previously expected unemployment to rise before showing signs of stabilising but there is a case for it to have already peaked at 6.4% in August ’14 and Feb ’15. The unemployment trend estimate, which intends to remove volatility from the figure, also remained steady at 6.1% so could be too soon to read too much into today’s 6.3% print.
Half-decent data not good enough:
With the removal of exchange rate commentary from the RBA notes this week traders have taken this as a sign that the current exchange rate is about right, and potential rate cuts to be pushed back into 2016 or simply annulled. However with commodities in a secular bear trend and the greenback likely to strengthen further with any hawkish comments from FED, the RBA’s monetary policy is likely to become less of a driving for the Australian Dollar in the weeks ahead.
Nonfarm data to have the final say:
US Unemployment claims tonight is considered as the ‘warm-up to Non-farms’ payroll, so a decent print from the US could weigh on the Australian Dollar. However the markets are likely to make more lasting decisions on tomorrow’s Nonfarm data set which is gathering more attention than usual in light of hawkish comments from FED members this week. If strong US employment occurs traders will likely take that as confirmation of a September rate hike, pushing the Greenback up further and weighing down on the Australian Dollar, but a particularly weak employment could help throw the Aussie a lifeline to remain above multi-year lows for the time being.
- - A break below 0.73270 support will put the Aussie on the back foot leading into the European and US session, with 73c becoming next likely support.
- - The Aussie faces strong resistance around 0.745 and not likely to retest it with today’s data-set, painting a downside bias for the session.
- - Looking ahead, a break of 0.7445 could open up 0.75 next week as this would break the bearish trendline from May ’15 and above a confluence of resistance levels between 0.743-45. - However if this area of resistance is to hold then we could see this as being a significant swing high as bears are likely to return, to push the Aussie down towards 0.7234 lows and beyond.