AUD/USD, AUD/JPY analysis: Yes AU unemployment rose, but…

Economic data in Australia is mixed. On one hand, this makes things tricky, we feverishly pour through data points to draw contrasting conclusions. On the other, it makes things easy because it means the RBA are equally as confused as we are. If there is no clear trend in the data across the board, it makes the policy path less clear. And that means they're less likely to change policy if there are too many ‘ifs and buts’.

Still, the return of rising inflation alongside the robust employment figures means there is a slight hawkish bias to the RBA's tone. And that's likely to remain in place following today's employment figures. Yes, unemployment rose to a two-year high of 4.1%. But then every other important metric also increased for this month's employment report, including job growth for full and part time workers, the participation rate and the employment to population ratio. Although one metric did tick lower, with the underemployment rate dropping to 6.5%.

And the net reaction of Australian markets has seen yields move higher and the Australian dollar move from cycle lows against various currencies, but the ASX 200 has pulled back from the day's high. This shows an increased odds of a rate hike, but we also need to factor in that yields and the Australian dollar were trading near cycle lows anyway - so I don't think it necessarily confirms a rate hike from the RBA just yet. Although it has allowed markets to mean revert higher from oversold levels.

AUD/USD, AU2 year yield

The response from yields were probably the purest response from the jobs figures, as it suggests odds of an RBA hike have increased. It just so happens that AUD/USD was probing the May high for the second time this week before yields dragged it higher. Assuming today’s low remains unchallenged by the New York close, AUD/USD will close the day with a double bottom at the May high – in turn hinting at further gains, at least over the near term.

But for those seeking value, AUD/JPY may be the better choice.

AUD/JPY technical analysis:

The cross has fallen 4.4% from the July high to today's low, and is now trying to gain some bullish traction from its lows. The daily chart shows that prices opened above the April high before an intraday break beneath it. But with momentum taking prices back above the April high, we may have seen the lower wick for the day, which marks a false breakdown. The daily RSI (2) is also moving higher after closing well into the oversold zone on Wednesday.

Yes, the MOF likely intervened on Wednesday but it already seems any nervousness of imminent intervention has passed. And that could allow the yen to drift lower and provide upside potential for AUD/JPY over the near-term as part of a counter-trend bounce. Besides, trading volumes have been relatively low near these cycle lows looking at the volume profile, and we have seen two extremely negative volume delta candles which to me suggest bears got greedy on the way down (on a relative basis).

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

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 www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.