AUD/USD sinks to new lows as focus shifts to Aussie jobs data

AUD/USD breaks to new lows despite US inflation data meeting expectations
Australian jobs report released at 11.30am AEDT. Upside surprises have become the norm recently
Selling rips and downside breaks favoured near-term, key support found at .6375

Overview

AUD/USD has broken to fresh lows despite the latest US inflation report printing in line with expectations, increasing the risk of an even deeper flush ahead from a technical perspective.

With RBA rate cut pricing over the next year curtailed significantly due to ongoing strength in domestic labour market and inflation data and similar monetary policy pricing offshore, you get the sense it would take a blowout Australian jobs report today to reverse the overnight move.

We’ve seen plenty of those recently, but given the extreme volatility often seen in this series, anything could be dished up today.

AUD/USD heavy even with bullish expectations built in

Source: TradingView

Whether you’re talking price action or momentum, AUD/USD looks terrible on the daily timeframe, taking out the US election evening lows with ease on Wednesday. With it now obliterated, there’s now very little visible support until around .6375, the location of an uptrend that began late 2022.

The last time the Aussie interacted with the level during the Japanese market meltdown of August, it resulted in significant bullish reversal, underlining its technical importance. As such, it looms as an obvious target for shorts.

Momentum is with the bears; RSI (14) has cut its uptrend like a hot knife through butter while MACD has crossed over from above, confirming the bearish signal. Selling rips and bearish breaks may prove more successful than buying dips in this environment.

One setup would be to sell here or wait for a potential squeeze towards .6513 as traders anticipate another stellar labour force report. That would allow for a tight stop to be placed above the level, providing appealing risk-reward for those targeting a retest of .6375.

Random number generator incoming

As for the October jobs report, those of us who have been covering it for decades know the employment change could produce anything, both in terms of magnitude and split between the full and parttime workforce. It has a reputation of being akin to a random number generator, dart board or roulette wheel. I therefore view them as noise rather than signal, and often fade any subsequent market reaction that comes from them.

The key number to watch is the unemployment rate. That’s what the RBA is graded on. In the latest RBA policy statement, it noted youth unemployment and broader readings on labour market slack such as underemployment had “declined” recently. As areas of the labour market regarded as being more cyclical in nature, trends in those numbers could be very influential today.

The detail

Markets look for employment to lift by 25,000 in October with the participation and unemployment rate holding steady at 67.2% and 4.1% apiece. The data will be released at 11.30am AEDT.

RBA governor Michele Bullock will also speak at 10am AEDT. However, with little domestic data since she last spoke, and with the jobs data arriving after her appearance, the only source of risk may come from comments regarding the outcome of the US presidential election. I deem this risk as low.

-- Written by David Scutt

Follow David on Twitter @scutty

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