Bumper AU jobs data and dovish Fed lights up AUD/USD
Tony Sycamore March 18, 2021 11:40 AM
The release this morning of Australian Labour Force report for February smashed expectations, reinforcing the view the economic recovery in Australia is on strong foundations.
The unemployment rate fell from 6.3% to 5.8% as the economy added 89,000 new jobs during the month, significantly stronger than the market consensus of 30,000 new jobs.
The timing of the report could hardly have come at a better time, with just two weeks left until the government Jobkeeper program is wound back. It is more notable as the unemployment rate is now below the RBA’s forecast of 6% by year-end, 9 months ahead of schedule.
Perhaps taking some of the smiles of the central banker fraternity in Australia, today’s news may embolden bond traders to retest the RBA’s resolve to defend the 0.1% 3yr bond target. As well as this morning’s dovish FOMC meeting that is likely to quell further short-term upside in the US dollar index, the DXY.
Although the FOMC raised growth and labour market forecasts and 7 of 18 participants now project at least one rate hike in 2023, Chairman Powell pushed back on the notion that it was hawkish, saying that not too much should be read into “the March 2020 SEP dot plot”.
As noted by US investment bank Morgan Stanley, “Our takeaway from the March FOMC meeting was that policymakers did not just 'double-down' on dovish guidance, they 'tripled-down'.”
The outcome of this morning’s FOMC, combined with the strong jobs reports will test the RBA’s preference for a lower AUD/USD exchange rate, after reaching the .7820 upside target mentioned in this article here last week, “Should the AUD/USD break/close above near term resistance .7720/30 area, it would signal a push towards .7820 is underway”.
Should the AUD/USD now clear resistance at .7820/40, there is little in the way topside to prevent the AUD/USD retesting the .8007 high. On the downside, dips should be well supported back to .7780/60 and to keep the short-term upside momentum intact, the AUD/USD has no right trading below .7700c.
Source Tradingview. The figures stated areas of the 18th of March 2021. 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
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.