Australian dollar boosted by robust jobs data

The Australian dollar got a leg up after employment numbers came in better than forecasted. 77.4k jobs were added in February to give an unemployment rate of 4.0% against expectations of 37k and 4.1% respectively. The participation rate was 66.4%, above 66.3% anticipated.

Most notable was that 127.9k full time jobs were added, while 44.5k part time jobs were lost.

It had already bounced off Tuesday’s lows as risk sentiment turned positive prior to, and in the aftermath of the US Federal Reserve’s decision overnight to raise their key interest rate by 25 basis-points.

The initial reaction to the Fed’s decision was to buy USD and the Aussie was sold off in that process. The mood changed in the ensuing press conference where Fed Chair Jerome Powell revealed an upbeat tone to the outlook. Risk sentiment brightened and AUD/USD gained.

AUD/USD reactions to news

The RBA on other hand remained relatively dovish. Despite saying at their latest meeting, 'Members noted that labour market conditions were the tightest since 2008 and the outlook remained positive' they have resisted any tightening of rates.

They stated at their February meeting that they would not be considering a move in the cash until they had seen first quarter CPI, unless conditions warranted it. CPI will be released 27th April. Today’s data is probably not enough to move the needle on those assessments.

The fundamental backdrop remains positive with Australian GDP for 2021 at 4.2%, a comfortable margin above the CPI of 3.5%, implying real growth in the economy of 0.7%.

Commodities have seen wild price swings since the Russian invasion of Ukraine as concerns of supply ricochet across markets. The initial squeeze saw extraordinary gains across energy, industrial metals, precious metals and agricultural commodities.

They have since been reversed to varying degrees as markets recalibrate over concerns of Chinese growth. Many large cities are going into lockdown as China pursue a zero-case policy for Covid-19.

Looking ahead, Australian retail sales and building approvals are due next week.

AUD/USD technical analysis

AUD/USD has tested both sides of an ascending trend channel in the last fortnight but has failed to close outside it, which may suggest that it remains intact. On Tuesday this week, a bullish Spinning Top Candlestick can be observed just prior to the rally seen yesterday.

Yesterday’s move up has seen the price break back above the 10, 21, 55 and 100-day simple moving averages (SMA) but is yet to overcome the 200 and 260-day SMAs. This could indicate that short and medium-term bullishness is running up against longer term bearishness.

Conflicting signals like this might see choppy trading conditions ahead. Support may lie at the previous lows of 0.71654, 0.70948, 0.70863, 0.70518 and 0.69676.

On the topside, resistance might be offered at the recent highs of 0.73675 and 0.74412.

Follow Daniel McCarthy on Twitter at @DanMcCarthyFX

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