The Australian Dollar posted strong gains in early Asian trading led by a stronger than expected jobs report. The monthly unemployment rate fell to 5.9% from 6.2% previously while the monthly job gains increased 58.6k beating a very conservative estimate of 14.8k. Last month’s job gains were also revised higher to -0.8k marking a strong jobs report all together. The biggest gains in hiring came from full-time employment positions with the participation rate moving 65% to 64.9%. The decline in the unemployment rate by nearly 3bps marks the lowest level of unemployment since May 2014.
The RBA, while lowering its inflation forecasts has managed to remain upbeat on the labour markets and today’s jobs report reflected just that and cemented the fact that the RBA is likely to hold on to the monetary policy well into end of 2016, diminishing the little remaining prospects of any rate cuts in the near term.
The AUDUSD opened the day at 0.706 and surged higher, gaining 1.11% in the process and remained well supported across the board. Price action is now close to testing the minor trend line connecting the highs from 0.7363 on 15th September and 0.7224 from 4th November. A break above this falling trend line could see a test to the long term support/resistance level at 0.7195 region. A break above this strong support/resistance level through 0.7253 is needed for further gains to the upside. There is a strong divergence showing a correction, at the very least to 0.759 in the longer term which could be confirmed only on break above the 0.7253 – 0.7198 region.
The AUDNZD also surged strongly, gaining 1.34% at the time of writing. The currency pair was initially trending lower after hitting resistance at 1.0867 but managed to reverse near 1.074 to break above the resistance. A retest to establish support at 1.0867 could see AUDNZD target 1.0987 which previously acted as support.
The Stochastics oscillator points to a corrective rally to the region of 1.0987 through 1.1036. Establishing resistance here could see the downtrend being resumed as the Stochastics points to a hidden bearish divergence building up in the markets. A retest to 1.0655 looks very likely on a break below the minor support/resistance at 1.0864
