AUD/USD – Slips After Weak Aussie Employment Numbers

AUD/USD has posted losses on Thursday, dropping below the 0.95 line. The pair lost ground following a weak reading from Australian Employment Change. In the US, there are two key releases later in the day – Advance GDP and Unemployment Claims.

The Australian labor market continues to struggle to create new jobs. Employment Change, one of the most important employment indicators, posted a weak gain of 1.1 thousand in October, a sharp drop from September, which saw  a gain of 9.1 thousand. The markets had expected a  much stronger gain, with an estimate of 10.3 thousand. This marks the fourth straight release which has been well short of the estimate, pointing to trouble in the employment market. The Unemployment Rate edged up from 5.6% to 5.7%, matching the forecast.

Earlier in the week, the RBA held the course and kept the benchmark interest rate at 2.50%. In the Bank’s Rate Statement, RBA head Glenn Stevens reiterated his concern about the value of the Australian dollar. Stevens stated that the Aussie was “uncomfortably high” and that “a lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy”. The RBA has stated this sentiment on numerous occasions (although in this instance Stevens employed particularly strong language), but is clearly reluctant to lower interest rates in order to push down the value of the Australian dollar. One possible explanation is that inflation in Australia came in at 2.2% in Q3, and the RBA does not want to take any steps which could raise inflation, such as lowering interest rates.

In the US, ISM Non-Manufacturing PMI rose to 55.4 points in October, up from 54.4 the month before. This beat the estimate of 54.0 points. We’ll get a look at Unemployment Claims on Thursday and Non-Farm Payrolls on Friday, and if these numbers are strong, there is sure to be talk of QE tapering in December, as the Fed has said on numerous occasions that the employment market must improve before QE tapering can occur.

AUD/USD for Thursday, November 7, 2013

AUD/USD November 7 at 13:40 GMT

AUD/USD 0.9465 H: 0.9526 L: 0.9455

AUD/USD Technical

• AUD/USD has lost ground in Thursday trading. The pair dropped below the 0.95 line in the Asian session. After recovering early in the European session, the pair is again falling late in the European session.
• On the upside, 0.9508 is back in a resistance role after the Aussie’s losses. This is followed by a resistance line at 0.9613.
• AUD/USD pair is receiving support from the round number of 0.9400. Given the weakness we are seeing in the Australian dollar, this line cannot be considered safe. This is followed by a support line at 0.9305, which was last tested in early October.
• Current range: 0.9400 to 0.9508

Further levels in both directions:

• Below: 0.9400, 0.9305, 0.9229 and 0.9119
• Above: 0.9508, 0.9613, 0.9700, 0.9821 and 0.9900

OANDA’s Open Positions Ratio

AUD/USD ratio has reversed positions in Wednesday trading, pointing to gains in short positions. This is reflected in the current movement of the pair, as the Australian dollar has sustained losses against the US dollar. The ratio is made up of a majority of open long positions, reflecting a trader bias towards the Australian dollar moving to higher ground.

AUD/USD has lost ground on Wednesday, and we can expect further movement from the pair as the US releases key GDP and employment data later in the day.

AUD/USD Fundamentals

• 00:30 Australian Employment Change. Estimate 10.3K. Actual 1.1K.
• 00:30 Australian Unemployment Rate. Estimate 5.7%. Actual 5.7%.
• 13:30 US Advance GDP. Estimate 2.0%.
• 13:30 US Unemployment Claims. Estimate 336K.
• 13:30 US Advance GDP Price Index. Estimate 1.5%.
• 15:30 US Natural Gas Storage. Estimate 40B.
• 18:30 FOMC Member William Dudley Speaks.
• 18:50 FOMC Member Jeremy Stein Speaks.
• 20:00 US Consumer Credit. Estimate 13.0B.

*Key releases are highlighted in bold

*All release times are GMT

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