Australia Labor Market took a surprise beating in March. Official records show a net of 36.1 thousands resident leaving their job posts. This figure was much worse then estimated and even if the data matched expectations, it would have been a tremendous dip from February which saw a net of 71.5K workers finding jobs. The huge decline in employment numbers push Unemployment rate to 5.6%, a 0.2% jump from Feb’s 5.4%, despite participation rate falling from 65.3% to 65.1%. Beneath the headline figure, the -36.1K is further broken down into Full Time Employment decline of 7.4K and Part Time Employment decline of 28.7K. It is scant comfort that a huge majority of job losses are attributed to part-timers, instead of full-time staff. Nonetheless, as part-time employment is more sensitive to shifts in economy, a sharp and painful decline still paints a bearish picture for Aussie short-term economy.
AUD/USD traded lower immediately with price falling from 1.055 to reach 1.05. However the short-term technical bullishness is still evident via the quick pullback as price bounced off 1.05 back above interim support of 1.052. Overall, a bearish pullback was already looking likely with momentum stalling during US trading session (post FOMC minutes). Stochastic readings were already heading lower below 80.0 before the news events, with a possibility to test 1.05 in the cards.
Looking at current prices, current sell-off may only be invalidated if price manage to trade back to the 1.054 – 1.055 consolidation zone formed earlier. A break back below 1.052 (price level during US open) may result in acceleration towards a retest of 1.05. The ability to break below 1.05 is still up in the air given current strong bullish run since the start of the week. Traders do not need to look back too long to see Stochastic readings breaking lower, only to see price rallying back above 1.05 (during Asian open yesterday). This make 1.05 level highly important, as it stands between current bullish bias, and opens up bearish possibility for drop back below 1.035 if broken. 1.048 may provide more support below 1.05 and we could potentially see stronger bearish acceleration if the level is broken.
Stochastic is continuing to point higher, which aligns with a bullish breakout scenario above 1.05. However, current Doji (shooting star) candlestick does not inspire confidence about the bullish breakout, and further confirmation may be needed before we see more bulls entering on this bullish push.
This weaker labor data is in line with a weaker Westpac Consumer Confidence index that came out earlier this week. If the negative data continue to pile up, we could see AUD/USD trading back towards 1.035, and potentially lower especially if the recently hawkish RBA is forced to start acting on their “ease if necessary” promise.
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