Australian Dollar, AUD/USD, Australian Jobs Report, RBA, US Fiscal Stimulus – Talking Points

• Australian Dollar was already under pressure before jobs data
• Dovish RBA, rising unemployment may keep AUD/USD falling
• Symmetrical Triangle, Death Cross point to bearish technicals

The AUD/USD struggled to find much support on a less-dismal Australian jobs report and may weaken ahead. In September, the country lost 29.5k jobs versus -40.0k expected. The unemployment rate also ticked higher to 6.9% from 6.8%, but didn’t match the 7.0% consensus. The bulk of job losses were seen from the full-time sector, shrinking 20.1k as part-time positions fell by just 9.4k. The participation rate held steady at 64.8%.

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Heading into the data, the Australian Dollar was already under selling pressure. That is because Philip Lowe, Governor of the Reserve Bank of Australia, boosted dovish monetary policy expectations. For one thing, Mr Lowe noted how local 10-year government bond yields are among the highest in the developed world. That is in fact true, check out my chart below comparing AU to US, NZ, CA (Canada) and UK bonds.

Philip Lowe noted that they are grappling with whether it could be beneficial to bring down the 10-year yield. The central bank is currently implementing yield curve control on the 3-year bond. In addition, Mr Lowe reiterated that it is possible they could cut the cash rate further down to 0.10% from 0.25%. Cash rate futures are pricing in about a 75% chance of this outcome come November.

The jobs report could underscore this argument given its general weakness. Outside of local monetary policy expectations, the growth-linked Australian Dollar will likely be keeping a close eye on ongoing US fiscal stimulus talks. If policymakers struggle to break the deadlock, this could inspire risk aversion and send the S&P 500 lower. That could subsequently pressure the Aussie lower.

Are Australian 10-Year Government Bond Yields Highest Amongst Developed Nations?

Chart Created in TradingView

Australian Dollar Technical Analysis

The Australian Dollar is trying to break under a Symmetrical Triangle chart pattern. Confirming the breakout could open the door to extending AUD/USD’s top since late August. That would entail clearing the 0.7015 – 0.7064 inflection zone, exposing June lows. Further supporting the bearish technical argument is a ‘Death Cross’ that formed in late September after the 20-day Simple Moving Averaged fell under the 50-day one.

AUD/USD Daily Chart

Chart Created in TradingView

— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter