Market News & Analysis

Top Story

Employment report weighs on AUDUSD

At last week’s meeting, the Reserve Bank of Australia (RBA) cut the official cash rate for the first time since 2016, by 25bp to 1.25%. In the last paragraph of the accompanying statement, Governor Lowe said the likelihood of future interest rate cuts were dependent on developments in the labour market “The Board will continue to monitor developments in the labour market closely and adjust monetary policy to support sustainable growth in the economy and the achievement of the inflation target over time.”

No surprises then that there has been such intense scrutiny after the release of this morning’s labour force data for May which has turned out to be somewhat of a mixed bag. Employment rose by +42.3k in May beating expectations of a 16k increase. Most of the rise came from an increase in part-time jobs, likely a temporary boost from election-related jobs.

Defying expectations of a fall to 5.1%, the unemployment rate remained unchanged at 5.2%, to consolidate its move away from the 4.9% cycle low in February. However, behind the higher than expected unemployment rate was a rise in the participation rate to 66.0%, a record high and a sign that more unemployed workers have been encouraged to look for work.

The mixed details of the report do not provide any clarity as to whether the RBA will deliver a follow-up cut again in July or August. Current market pricing has 13 bp of a cut priced for the July meeting and a full 25bp cut priced by August. Another 25bp cut is priced for early 2020, which would take the cash rate back to 0.75%. With so much RBA easing activity already priced into the interest rate market and by association the AUDUSD, it may just be that the fate of the AUDUSD remains in the hands of the technical backdrop.

Last week’s rejection from the .7022 high, confirms the AUDUSD’s downtrend remains in place and vulnerable to a retest and break of the May quadruple low at .6865. Conversely, should the AUDUSD register a break/close above .7020/25, it would negate the short-term negative bias and allow the rally to extend back towards the 200-day moving average, .7120 area.

Employment report weighs on AUDUSD

Source Tradingview. The figures stated are as of the 13th of June 2019. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

Disclaimer

TECH-FX TRADING PTY LTD (ACN 617 797 645) is an Authorised Representative (001255203) of JB Alpha Ltd (ABN 76 131 376 415) which holds an Australian Financial Services Licence (AFSL no. 327075)

Trading foreign exchange, futures and CFDs on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange, futures or CFDs you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss in excess of your deposited funds and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange, futures and CFD trading, and seek advice from an independent financial advisor if you have any doubts. It is important to note that past performance is not a reliable indicator of future performance.

Any advice provided is general advice only. It is important to note that:

  • The advice has been prepared without taking into account the client’s objectives, financial situation or needs.
  • The client should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation or needs, before following the advice.
  • If the advice relates to the acquisition or possible acquisition of a particular financial product, the client should obtain a copy of, and consider, the PDS for that product before making any decision.
Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.