WWM - Analytics

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    FOREX: Australian Labor Market Stabilizes

    Australia's December employment data posted a decrease of -1k but beat market expectations for the third consecutive month. The employment rate remained unchanged at 5.8%, which was better than forecasts of a rise to 5.9%, while the participation rate dropped to 65.1%. Full time employment continued to show strength while part time employment declined. Of particular note was the fairly sizable revision to last months change in employment which rose by 3.8k and would appear to offset this report's headline number. The bottom line is that the Australian economy created  over 130k jobs in the final quarter of 2015.

    • Employment Data {Source: Bloomberg}AU_employmentData_011316.png

    For the year 312k job seekers were employed with 186k of those finding full time employment. Unemployment rate fell from 6.2% to 5.8% while the employment to population ratio rose by almost 1%. Today's outcome was widely expected after the remarkable strength of the past two reports and would seem to imply stabilization in the Australian labor market which is a necessary precursor for economic growth. The two main threats to this are, of course, China and the strength of the AUD. The RBA still has some arrows in its quiver (rate cuts) should they need to stem unanticipated Aussie strength or resuscitate the economy but there is very little that they can do with regard to the worlds' second largest economy. 

    • Unemployment RateAU_employmentRate_011316.png
    • Change in employmentAU_EmploymentChange_011316.png
    • AUD/USD - Daily
      Aussie, which was trading around mild support at 0.6930 ahead of the release, immediately spiked higher to 0.6954 before running out of steam. It has since made an attempt at moderate support at 0.6900 but was thwarted, for now, as buyers stepped in around 0.6920. China remains the key determinant for AUD direction. If, and its a big if, there are no more shocks then Aussie could potentially test 0.7050 and ultimately 0.7125 over the next few sessions as it corrects its extremely oversold state. Else, expect another leg lower as major support at 0.6900 comes into focus with a breach targeting levels not seen since the financial crisis. Essentially, any move higher has to viewed as corrective in nature while a break of 0.6900 would signal that Chinese issues and Aussie bears have resurfaced. (click to enlarge)audusd_011316_D.png

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