AUD/USD: charging bulls get penned in again, AUD/JPY taking a trip downtown

• AUD/USD is suffering a blow from a strong devaluation the Chinese currency and also from a mixed jobs report with something in it for both the bears and the bulls.  
• AUD/USD is currently trading at 0.7115, off from the highs of 0.7151 and just above the lows of 0.7104. 
• DXY is up to 95.70 critical resistance and USD/CNH is popping the 6.95 handle - Equities are also off, and AUD/JPY is subsequently getting battered. 

The jobs data was solid concerning a better composition that was skewed towards full-time (+20.3k) along with a solid rise in hours worked. However, the participation rate was lower which lead to a dip in the unemployment rate to 5% which is still above where the RBA would like to see that level. 

Casting minds back to a speech made by RBA Deputy Governor Debelle's speaking at the Citi Conference on The State of the Labour Market, he made reference to not only the RBA concerns over the nation's low wage growth but he also hinted that the unemployment needs to fall BELOW 5% (current: 5.%) to stabilize inflation. So, if the next quarter's level stays at 5% or above, then the numbers still do not tally up. And should this be a new trend in the participation rate as well, (which is now falling), then we are suddenly looking at a far worse picture overall for that is an area where the Aussie jobs reports have been reliable to date. And, when you add all this to the headline and numbers that did disappoint, you suddenly get a very different picture of yesterday's jobs report. Remember, we are talking about the divergence between the RBA and the Federal Reserve here. The Fed is hiking, the RBA is on hold, and it seems as though the bulls are clutching at straws with this jobs report to back the narrative that the RBA will be playing catch up with the Fed.

Keeping it real 

The market has been pricing in a rate hike from the RBA by the end of 2019 at around 40%. Importantly, the RBA had forecasted that the unemployment rate would drop to 5% by mid-2020. Well, due to the participation rate falling, we are already there. It would now make sense that should the participation rate pick up, and the unemployment rate remains at or below 5%, the RBA will cautiously lower its unemployment rate forecasts and hint at higher inflation by mid-2020. In such a scenario, this would likely increase the likely hood of a rate hike by the end of 2019. 

The next hurdle is the Q3 wages report, due mid-Nov. It also remains a possibility that these forecasts will be lowered in November with the release of the next Statement on Monetary Policy. If so, then the bulls can have their cake and eat it - But, for the meantime, bulls might wish to tread carefully with a rise in the greenback and too many risks to count, even if counting on both hands.  Risks from a geopolitical, EM-FX, yields rising, and Chinese/European contagion perspective - all of which the Aussie trades as a proxy too should keep a lid on rallies.  

AUD/USD levels

Analysts at Commerzbank noted that AUD/USD is struggling to maintain gains at present and the intraday Elliott wave counts have turned negative, adds a precaution we will tighten stops:

"It remains still upside corrective, but we look for gains to remain capped by the 55-day moving average at 0.7226 and the 0.7296 2018 channel and remains under overall pressure. The market last week saw a minor break to a new low which was accompanied by a TD perfected set up, and we note TD support at 0.6995. Below 0.6995/75 targets .6827 the 2016 low."