Australian Dollar Fails to Extend Gains, Despite Good Employment


The Australian dollar rose by more than 800 pips in one week. But AUD/USD could not tackle a strong resistance line, despite strong employment numbers. Is it time for a break? Or are these figures just a temporary improvement in a slowing economy?

Australia gained 20,400 jobs in September, more than double the early expectations for a rise of 10,100 jobs. The unemployment rate also provided a nice surprise: it fell from 5.3% to 5.2%. Is this enough?

An unemployment rate of 5.2% or 5.3% is envied by many countries. On the other hand, this drop comes on the background or two consecutive 0.2% rises in the rate. It stood on 4.9% for many months. It then rose to 5.1% in July and advanced to 5.3% in August.

Also the gain in jobs came on the background of a loss of 10,500 jobs in August and a smaller drop in July. Both indicators point to a correction now.

Sharp AUD/USD moves

AUD/USD dropped to just under 0.94 last week only to rise very nicely at the second part of the week. It then advanced on parity and pushed through on the third attempt, thanks to European hopes more than anything else.

When the Australian employment figures were released, the pair made another jump and peaked at 1.0231, shy of the 1.0254 resistance line. But it couldn’t advance further and dropped since then. For more technical lines, see the Australian dollar forecast.

The drop in Chinese trade balance didn’t help either.

AUD/USD is a very volatile pair and gaining traction among forex traders. This relative stability isn’t likely to stay with us for a long time.

But were will it go? In the Q4 outlook, I point to the general direction – down. What do you think?

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  1. I also do believe it is going DOWN. This direction is very clear when you look to the monthly chart (even without any indicators). I think that the pair will drop sharply probably by next week.

  2. Yes, the direction is very clear. The upper boundary of the trend line is around 1,036-1,037 at present. This might get tested on Monday. Change will come on Tuesday when we will see that the Chinese economy slowed faster in Q3 than anticipated. Aussie meeting minutes are also on Tuesday. Aussie quarterly CPI might have been the lowest in several years and that will enforce Mr. Stevens to lower interest rate at the next meeting. Aussie employment figures were good but as I see Westpac consumer sentiment for October it will not improve further. Instead, it will jump back to 5,3% at least. US Consumer confidence data suggests that September was indeed a good month but October will be worse. Much worse. SPX can reach as low as 1000 by early November.

  3. What that means for usd is that usd index will rise further, audusd can get as low as 0,9, eurusd to 1,3 (at least) usdcad to 1,08, kiwi to 0,72. Pound might drops to 1,5 and the yen will get over 78 even if there is no intervention.

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