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  • AUD/USD trades firmly on the back foot on Thursday, amid a broad pick up in USD on an apparent uptick in pandemic/lockdown concerns.
  • AUD underperforms within the G10 despite blockbuster October labour market data numbers.
  • Aussie State South Australia going into a circuit breaker lockdown is likely weighing, the pair eyes a test of recent lows at 0.7220.

AUD/USD trades firmly in the red around 0.7270 and is the worst G10 performing currency on the day. The pair trades lower by roughly 30 pips or 0.4%.

Aussie ignores blockbuster jobs data, likely due to Covid-19 concerns

The Australian labour market performed significantly better than expected in October, with the economy adding 178.8K jobs versus expectations for job losses of 30K. Promisingly, much of this rise was driven by gains in full-time employment, which rose by 97K. Moreover, unemployment rose only very slightly to 7.0%, lower than the expected rise to 6.9%. The increase in the unemployment rate despite the economy adding nearly 180K jobs on net in October can be explained by a jump in the participation rate to 65.8% from 64.8%, the second-largest jump on record (after July’s 1.1% jump from 62.9% to 64.%). The Australian participation rate is pretty much now back to pre-Covid-19 levels.

Though Thursday’s economic data was better than pretty much anyone could have hoped for, AUD is an underperformer on Thursday. A broad risk-off feel to markets and pick up in the US dollar has been one factor working against the risk-sensitive AUD; market focus seems to have returned to the growing near-term economic risks presented by the continued spread of Covid-19 in the US (NYC announced the closure of schools close to the end of Wednesday’s US session, triggered stock market downside) and elsewhere.

Indeed, concerns regarding the spread of the virus in Japan are rising, with Tokyo at record numbers and now at its highest virus alert level. Moreover, and likely directly contributing to AUD downside is the news that Aussie state South Australia will immediately implement a six-day “circuit breaker” lockdown after an outbreak was recently uncovered, serving as a reminder of the risks the pandemic still poses to the country.

AUD/USD eyes further downside towards bottom of recent range

AUD/USD has been unable to rally back to the north of the 0.7280 mark in recent trade, with sellers coming in ahead of a retest of the previous weekly lows around 0.7284. The pair now looks to be conforming to a resistance in the form of a downtrend linking Wednesday and Thursday European morning session highs (see the one hour chart).

If the bears remain in control, a retest of Thursday lows at 0.7255 and then ultimately the 0.7250 level are on the card in the near future, as is, eventually a test of the lower bounds of AUD/USD’s recent trendline, the bottom of which links the 3 November highs and 13 November lows at roughly 0.7220.

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