Yesterday, the AUD/USD pair managed to enter the level of 0.77, taking advantage of the weakness of the US currency. However, today's publication of data on the growth of the Australian labor market disappointed investors, although almost all of its components came out in the "green zone", after which the Australian dollar came under pressure again, even despite the continued weakness of the US dollar.
If one looks at it for the first time, the market reaction to today's release seems unusual. After all, the Australian unemployment rate showed a downward trend again, that is, for the fifth month in a row. At the same time, the published figures were better than forecasted. Most experts expected the indicator to decline to 5.7%, but it actually fell to 5.6%. In fact, the indicator reached pre-crisis values (before the COVID-19 pandemic). The unemployment rate fluctuated in the range of 5.0% -5.3% for several months.
In turn, the indicator of the growth in the number of employed exceeded the forecasted values twice: analysts expected to see this indicator at around 35 thousand, but in reality, it came out at the level of 70 thousand. However, this component of the release became a problem. The fact is that the increase in the number of employed in March was due solely to the growth of part-time employment. Meanwhile, the full employment indicator showed a negative result for the first time since September last year. Therefore, if the part-time indicator surged by 90 thousand, then the full-time component declined by 20 thousand. It should be recalled that RBA's head, Philip Lowe has repeatedly stated that such an imbalance could negatively affect the recovery process. After all, full-time positions imply a higher level of wages and a higher level of social security compared to temporary part-time jobs. Hence, the decline in consumer activity of Australians and weak inflationary growth. Therefore, the current dynamics may seriously concern the members of the Australian regulator.
It is also worth recalling that the state subsidy program JobKeeper was still in effect in March, which was used by about a million Australians. The program ended on March 26, and this fact will negatively affect the main indicators of the labor market: according to some estimates, about 100 thousand Australian residents will lose their jobs in the next few months – mainly in the tourism industry and in the restaurant sector. Therefore, the "Australian Nonfarm" for April may come out in the "red zone", reflecting the slowdown in the recovery process.
In addition, another indicator also put additional pressure on the Australian dollar today. This is the expected inflation. The Australian consumer's estimate of inflation is an indicator of current household sentiment regarding consumer price dynamics. That is, it acts as a kind of barometer. This indicator showed an upward trend for two months – in February and March. However, the April result was disappointing – the indicator came out at the level of 3.2% instead of the expected growth to the level of 4.2%. This is the weakest result since September last year.
In this case, today's data were not in favor of the Australian dollar. In view of this, the specified currency left the reached level of 0.7746 and is gradually falling to the base of the 77th figure. It is also worth noting that the AUD/USD pair is showing a downward trend even despite the continued weakness of the US currency, which came under pressure yesterday due to Jerome Powell's "dovish" rhetoric.
In general, the Fed Chairman did not say anything new. He just reminded once again that the regulator will not close QE ahead of schedule, even if inflation surpasses the 2% target. According to Powell, the Fed will begin to phase out stimulus programs when it makes significant progress towards achieving the goals. Against this background, he noted that markets should not focus on point predictions. The rate is likely to be raised in 2023 (but not earlier than the end of 2022). In other words, his statement was almost the same from his previous speeches. But at the same time, the US dollar reacted negatively to this speech – the dollar index showed a downward trend during the Asian session on Thursday.
From the point of view of technical analysis, the AUD/USD pair failed to break through the resistance level of 0.7750, which corresponds to the upper line of the Bollinger Bands indicator on the daily chart. The controversial release on the growth of the Australian labor market cancelled the upward momentum of the pair, after which the sellers took control. Given this fact, we can assume that the Australian currency will follow the American one in the medium term, reacting to an increase or decrease in the US dollar index. At the same time, short positions can be considered with the first short-term target at 0.7690 (Kijun-sen line on D1) and the main target at 0.7650 (middle Bollinger Bands line, coinciding with the Tenkan-sen line on the same time frame).
