Employment data out of Australia will be watched on Thursday at 00:30 GMT as the Australian dollar struggles to regain positive momentum following the poor GDP readings for the third quarter. The
After a patchy start to the year, employment growth picked up some steam in the summer. The tightening labour market has led to the unemployment rate falling to a 6-year low of 5.0% in September and October. The solid jobs growth is expected to have continued in November, with analysts anticipating an addition of 20k jobs, while the jobless rate is forecast to hold at 5.0%.
But with wage growth still subdued – it stood at 2.3% in the third quarter – and headline inflation hovering around 2%, there is little pressure on the Reserve Bank of Australia to raise interest rates anytime soon. Up until just a few months ago, most analysts were expecting the RBA to begin hiking rates in late 2019. However, following the worsening outlook for the world economy in 2019 and a softer-than-projected GDP growth during the September quarter, both economists’ and markets’ expectations of an RBA rate rise have been pushed back into 2020. In fact, interest rate futures are pricing a small probability of a cut in the RBA’s cash rate in 2019.
Any further weakness therefore in incoming economic data would likely pressure the AUD/USD, threatening fresh lows below October’s 32-month trough of $0.7018. Worse-than-expected employment numbers could see the AUD/USD slip below nearby support around $0.7160 – the 61.8% Fibonacci retracement of the up-leg from $0.7018 to $0.7393. A drop below this area would bring the $0.71 handle into range, which is just above the 78.6% Fibonacci. Failure to hold above this level would open the prospect of a breach of the October low.
However, one possible risk for the AUD/USD bears is the possible end to the widening yield differential between the
Better-than-anticipated employment figures could lift the AUD/USD above immediate resistance at the 50-period moving average in the 4-hour chart, just below the $0.72 level. The 50% Fibonacci lies slightly above this point and clearing these hurdles would open the way for the 38.2% Fibonacci at $0.7250. Even stronger gains could see the next major resistance coming from the 23.6% Fibonacci just above the $0.73 handle.
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