What the fallout from “Super Thursday” means for the AUDUSD

After the highest US inflation print since 2008 failed to move currency markets last week, the focus moved to today, bringing with it an FOMC meeting, a speech by RBA Governor Philip Lowe as well as Australian jobs data.

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My colleague Matt Weller has provided an excellent review of this morning’s FOMC meeting here. Hence this note will provide a review of RBA Governor Lowe's speech as well as the Australian jobs data for May and what it all means for the AUDUSD.

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Before I do, a point worth noting is that the initial post FOMC reaction in FX has been promptly reversed in recent times and the last time an initial post FOMC move extended was in June 2019. Perhaps wary of this, traders were initially reluctant to chase the AUDUSD lower after the re-open this morning.

However, after RBA Governor Lowe's speech concluded noting “For inflation to be sustainably in the 2–3 per cent range, wage increases will need to be materially higher than they have been recently”, the AUDUSD took its first look below .7600c since mid-April.

A move that was soon to be reversed as a huge 115k rise in employment sent the unemployment rate down to its pre-pandemic rate of 5.1%. This despite the participation rate rising to 66.2%, just below its all-time high.

The unemployment rate is now within eyesight of Treasury’s estimate range for NAIRU (full employment). The question now is what would prompt the RBA to bring forward rate hike forecasts as the Federal Reserve did this morning?

Goldman Sachs suggest that should the unemployment rate fall to 4.25% by the end of 2021, it would be enough to generate the wages growth and inflation to warrant a rate hike by mid-2023.

With this in mind, providing the AUDUSD continues to hold above a band of medium-term support .7550/.7530 area coming from the 200-day ma and the April .7532 low, the risks for the AUDUSD are to the upside.

Aware that should the AUDUSD break and close below the aforementioned support zone, then allow the decline to deepen towards .7400c.

What the fallout from Super Thursday means for the AUDUSD

Source Tradingview. The figures stated areas of the 17th of June 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

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