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
Recommended Content
Editors’ Picks
EUR/USD retreats below 1.0700 as USD rebounds
EUR/USD lost its traction and retreated slightly below 1.0700 in the American session, erasing its daily gains in the process. Following a bearish opening, the US Dollar holds its ground and limits the pair's upside ahead of the Fed policy meeting later this week.
USD/JPY recovers toward 157.00 following suspected intervention
USD/JPY recovers ground and trades above 156.50 after sliding to 154.50 on what seemed like a Japanese FX intervention. Later this week, the Federal Reserve's policy decisions and US employment data could trigger the next big action.
Gold holds steady above $2,330 to start the week
Gold fluctuates in a relatively tight channel above $2,330 on Monday. The benchmark 10-year US Treasury bond yield corrects lower and helps XAU/USD limit its losses ahead of this week's key Fed policy meeting.
Week Ahead: Bitcoin could surprise investors this week Premium
Two main macroeconomic events this week could attempt to sway the crypto markets. Bitcoin (BTC), which showed strength last week, has slipped into a short-term consolidation.
Five Fundamentals for the week: Fed fears, Nonfarm Payrolls, Middle East promise an explosive week Premium
Higher inflation is set to push Fed Chair Powell and his colleagues to a hawkish decision. Nonfarm Payrolls are set to rock markets, but the ISM Services PMI released immediately afterward could steal the show.