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  • NFP rises by 134K in September in the U.S. vs 185K expected.
  • Unemployment rate falls to the lowest level since 1969 at 3.7%.
  • The US Dollar Index turns negative on the day following the data.

The AUD/USD pair slumped to its lowest level since early February of 2016 at 0.7050 with the knee-jerk market reaction to the U.S. employment report but quickly retraced its losses. As of writing, the pair was up 0.08% on the day at 0.7080.

Although the monthly report released by the U.S. Bureau of Labor Statistics showed that the unemployment rate fell to its lowest level since 1969 at 37%, a less-than-expected increase in nonfarm payrolls weighed on the greenback. On the other hand, wage inflation, as measured by the annual average earnings, edged down to 2.8% from 2.9%. The US Dollar Index lost its traction following the data and was last seen down 0.2% on the day at 95.57.

Nevertheless, today’s employment figures seem good enough to allow the Fed to stay on its tightening path. “The large upward revision to August payrolls, from 201,000 to 270,000 takes some of the sting out of the September number. Taken together the total of 404,000 is slightly above the recent average,” FXStreet Senior Analyst Joseph Trevisani noted. “There is little in this report to dissuade the Fed from continuing its projected rate path. Remember, the Fed is not tightening to choke off future inflation, or curtail excessive growth, at least not yet, but to return interest rates to a more ‘normal’ level. What the normal or neutral level might be in relation to economic growth is uncertain.”    

Despite that modest recovery, the pair is still down nearly 150 pips on a weekly basis.

Technical levels to consider

The pair could face the first resistance at 0.7100 (psychological level/Oct. 4 low) ahead of 0.7190 (20-DMA) and 0.7230 (50-DMA). On the downside, supports are located at 0.7050 (daily low), 0.7000 (psychological level) and 0.6935 (Jan. 25, 2016, low).