AUD/USD: Employment Numbers Dents Momentum

The Australian Dollar has taken a blow following a disappointing employment report that indicated the economy shed a huge 146.3k employment in August, compared to the -80.0k employment predicted by the Bloomberg consensus. As predicted, the unemployment rate fell by a basis point to 4.5 percent, compared to a projected rate of 5 percent. Even though there were fewer employed individuals, the unemployment rate was likely lowered as a result of a decrease in the workforce participation rate.

A surge of lockdowns, mainly affecting New South Wales (NSW) and Victoria, is believed to be to blame for a large number of job losses in the region. However, it looks that the Australian dollar is drifting a bit weaker in reaction to the headline statistics, despite a brief round of contingency before the data release. Some experts predict that the economy would decline in the q3 as a result of the extensive COVID-related regulatory measures in place.

Governor of the Reserve Bank of Australia (RBA), Philip Lowe, took a position in support of such a viewpoint earlier this week. The governor of the Reserve Bank of Australia predicted a decline of at least 2 percent in the third quarter, as well as an unemployment rate in the upper 5 percent range. As a result of this employment data, Mr. Lowe’s development contraction theory is strengthened. However, although the market is trading in a rate rise in 2023, Mr. Lowe believes the price rise will be implemented in 2024. Another hurdle for the Australian Dollar is the fact that the objective is so far away in comparison to more aggressive central banks.

AUD/USD CHART. Source: Tradingview.com

But, if immunization rates rise, a return in the 4th quarter may be on the horizon. Australian officials have made a concerted effort to increase the country’s immunization program. By December, the government expects to have achieved an 80 percent immunization rate among individuals aged 16 and up. According to the present plan, travel bans and lockdown procedures will be substantially reduced during that period. If the pent-up need proves to be higher than anticipated, the Reserve Bank of Australia may be able to take some further aggressive rate risks. Till then, however, it looks that the Australian Dollar’s route of minimal resistance is downward rather than upward.

Technical Analysis on the AUD/USD

The technical position of the Australian Dollar with the US dollar appears to be more optimistic than its intrinsic forecast. In the previous week, prices have been backed by the increasing 20-day Simple Moving Average (SMA), which has been on the rise. The formation of a Falling Wedge formation implies a bullish inclination, which is supported by the data. A rise over the pattern’s resistance line may signal the beginning of a breakout phase.

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