Why the AUDUSD will look through a soft jobs print on Thursday

In an almost carbon copy of Tuesday last week, traders in Asia this morning have tuned in to find that a second pharmaceutical company, Moderna overnight reported impressive results for their COVID19 vaccine trials.

Charts (1)

The news from Moderna further bolstering sentiment after the weekend signing of the largest trade deal in history between 15 Asian Pacific countries including China, Japan, South Korea, and Australia.

While it is doubtful the agreement will ease strained Australia and China tensions, it does provide a pathway for Australia to reduce its trade reliance on China. In response and also buoyed by a weaker U.S dollar, the AUDUSD has been able to cement its first daily close above .7300c for two months.

Further gains in the AUDUSD are likely to depend on the outcome of Thursday's labour force report for October. As confirmed by this morning’s RBA minutes and Governor Lowe's speech last night, the labour market is very much at the centre of the RBA’s monetary policy setting.

Thursday's labour force report is expected to show a 30k drop in jobs and the unemployment rate to rise to 7.2% from 6.9% in September. However, any weakness in the AUDUSD caused by a soft number is likely to be temporary as the market then looks towards a stronger employment number in November, following the easing of lockdown restrictions in Victoria.

Technically the AUDUSD is at an interesting juncture sitting just below resistance .7340/50ish, coming from a trendline drawn from the .8135 high of January 2018, and above an important layer of support, formerly resistance .7220/00c mentioned in our last article on the AUDUSD here

Keeping in mind a break/close above .7200c would be initial confirmation the uptrend has resumed.”

A sustained break above the downtrend resistance .7340/50ish, ideally after Thursday's jobs data would reignite the positive momentum in the AUDUSD and with it expectations of a retest of the September .7414 high, before .7500c.

Aware that a failure break/close above .7340/50, followed by the loss of near-term support .7220/00 would warn that a deeper pullback towards range lows at .7000c is underway.

Why the AUDUSD will look through a soft jobs print on Thursday

Source Tradingview. The figures stated areas of the 17th of November 2020. 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

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.