The Aussie has broken a key support zone around 0.9400 against the US dollar ahead of Chinese inflation figures. Yesterday, the pair was sent on a wild ride following the release of Australia’s March labour market report and China’s March trade figures.
Australia’s unemployment rate unexpectedly dropped to 5.8% in March (expected 6.1%, prior 6.1%), underpinned by a surge in part time employment and a drop in the labour force participation rate. 40.2K part time jobs were added over the month and the participation rate dropped to 64.7% from a revised 64.9%. The strong part time employment figures and the drop in the jobless rate is encouraging, but the lack of full time jobs and the fact that people choose to leave the workforce taints the overall report. Yet, when combined with the prior month’s report, which included a surge in full time employment, Australia’s labour market doesn’t appear to be as soft as some analysts previously feared, thus the Australian dollar railed on the back of the figures.
Later in yesterday’s session, soft Chinese trade figures quickly ended the Aussie’s rally. China’s exports unexpectedly fell for a second straight month and imports also fell in March. Exports slid 6.6% m/m (exp. 4.8%) and imports dropped a dismal 11.3% m/m (exp. +10.1%). This rattled investor sentiment and eventually resulted in AUDUSD erasing most of its post-employment gains. While China’s export market is waning in importance, the sector is still relied on heavily for overall growth, thus yesterday’s data may see some analysts downgrade their GDP targets for this year.
Nonetheless, the Chinese data isn’t overly bad for Australia, with commodity imports remaining strong, and Australia’s employment figures are encouraging, which is why the Aussie didn’t follow the kiwi lower overnight. However, there appears to be some technical weakness in the pair, especially if it closes below 0.9400. This may confirm a short-term bearish head & shoulders pattern (see chart).
Note: it’s worth keeping an on China’s March inflation figures, which are due out at 0130GMT
- CPI exp. 2.4% y/y; prior 2.0%
- PPI exp. -2.2% y/y; prior -2.0%
Source: FOREX.com
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