- AUD/USD is a little higher on the day, following a choppy session.
- AUD traders will be on notice for the release of flash PMI data and preliminary retails sales.
AUD/USD saw some selling pressure in the first half of the US trading session, dropping from mid-European session highs of only about 10 pips away from the 0.7800 level to session lows just above the 0.7730 mark. However, over the last few hours, the pair has recovered back into the green and now trades in the 0.7760s, up about 0.2% or around 15 pips on the day.
Thursday’s price action shows that FX markets, or at least the Aussie and the US dollar, are in consolidation mode; the lows that the pair is setting continue to get higher and an uptrend from 10 February to now appears to be supporting the price action. Meanwhile, highs are starting to get lower, with Thursday’s high falling short of the weekly high set on Tuesday of just above the 0.7800 level. Should USD bulls come back to the forefront and the pair break beneath its recent uptrend support, that would potentially open the door to a move towards the 0.7700 level, which coincides quite nicely with the highs of 28 and 29 January and the pair’s 21-day moving average at 0.77027.
Driving the day
The Aussie was a strong performer during the Asia Pacific session on Thursday amid strength in base metal prices upon the return of Chinese market participants from their week off for Lunar New Year celebrations and in wake of the latest Australian Labour Market report.
On which note, it was a mixed report; the economy added 29.1K jobs, less than the 40K expected and down from December’s 50K employment gain. However, full-time employment gains were strong, with 59K new jobs being added. The unemployment rate also dropped a little more than expected to 6.4% from 6.6% in December, but this was driven in part by a drop in the country’s participation rate to 66.1% from 66.2% in December.
Broadly speaking, analysts were upbeat about the report; “Australia has recouped almost all the jobs lost in April/May 2020 at the depths of the recession and nationwide lockdown,” said the head of Australian economic and fixed-income strategy at Royal Bank of Canada, before adding that “while the unemployment rate remains higher, it is heading in the right direction.”
Meanwhile, according to Goldman Sachs’ chief economist for Australia Andrew Boak; “we expect robust jobs growth to continue in 2021, although we are mindful of risks around the termination of Australia’s JobKeeper wage subsidy in March and note overall unemployment is likely to remain well above levels consistent with full employment and faster wages growth”.
Back to the fundamentals driving AUD price action on Thursday; midway through the Asia pacific session, global equities began to decline and, initially, the Aussie was immune to the broad deterioration in risk appetite. However, once US market participants arrived in the market, the move lower in stocks (and crude oil) accelerated and the Aussie started to drop with it. The deterioration in risk appetite was in part driven by a sharp move higher in US bond yields, which in fairness has now retraced and the US 10-year yield is now actually a little lower on the day (though real yields are still up). But risk appetite has been recovering since the second half of the US session amid a lack of fundamental catalysts and this has helped the Aussie back into positive territory versus the USD on the day.
Coming up
Looking ahead, Markit will be releasing Australia’s preliminary February PMI report at 22:00GMT, an event that will certainly be worth watching for the AUD traders. Thereafter, preliminary Retail Sales data for January is set to be released at 00:30GMT and will also be worth watching. Otherwise, attention remains on USD dynamics and the themes driving global risk appetite such as the pandemic, stimulus and central banks.
AUD/USD four hour chart
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