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Market News AUD/USD declines toward 0.6900 following Australia's Employment Change report

AUD/USD declines toward 0.6900 following Australia's Employment Change report

AUD/USD accepts offers to retest intraday low and remains under pressure at the weekly bottom. July's Employment Change in Australia was -40,9K, while the Unemployment Rate decreased to 3.4%. The market attitude continues to be divided as yields decline and equity prices fluctuate. China and Taiwan-related news along with dovish Fed Minutes helped to challenge bears earlier.

Daniel Rogers
2022-08-18
482

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During Thursday's Asian session, AUD/USD is burdened by yet another disappointing employment report, not to mention new Taiwan-related fears. In spite of this, the Australian dollar continues under pressure at 0.6935, having refreshed the daily low to 0.6924 as of press time.

 

Australia's front page Employment Change decreased to -40.9K, compared to 25K anticipated and 88.4K previously, while Unemployment Rate down to 3.4%, compared to 3.5% expected and previously. In addition, the Participation Rate decreased to 66.4% compared to 66.8% predicted by the market and previous data.

 

The Aussie Wage Price Index for the second quarter (Q2) exerted downward pressure on the AUD/USD exchange rate the day before. In spite of this, the figures for the second quarter revealed a quarterly growth rate of 0.7%, the highest rate since September 2014. The Reserve Bank of Australia's (RBA) recent cautious comments are justified by the fact that the data remain abysmal when compared to the inflation figures.

 

In addition to the Australian employment data, China's mixed economic outlook also favors AUD/USD sellers. China Securities News reported earlier in the day that "China may issue 1.5 trillion yuan in extra debt as part of an investment push."

 

In contrast, the most recent statement from the US Trade Representative's office, "Early this autumn, the United States and Taiwan will begin official negotiations on a trade initiative," seems to reignite worries of a US-China conflict and dampen sentiment. On the same line, top US diplomat for East Asia Kritenbrink stated, "The United States is committed to sustaining peace and stability across the Taiwan Strait."

 

Notably, the Fed Minutes probed US dollar bulls the day before by stating, as reported by Reuters, that officials were prepared to decrease the pace of interest rate hikes in parallel with signs of a downturn in inflation. However, July's stronger US Retail Sales appeared to impose downward pressure on the AUD/USD exchange rate.

 

In response to these events, 10-year US Treasury rates retreated from the weekly highs near 2.90 percent, falling one basis point (bp) to 2.89% as of press time. In addition, S&P 500 Futures post modest losses after reversing from a four-month high the day before.

 

The weekly releases of US Initial Jobless Claims and Philadelphia Fed Manufacturing Survey for August could provide DXY traders with entertainment. Fears of a recession and Fed concerns will be the most important factors to monitor for additional impetus.

 

The combination of the sharpest negative MACD signals since late June and a clear break to the downside of the one-month-old bullish channel gives AUD/USD bears optimism of revisiting the yearly low of 0.6678. However, the 50-day simple moving average and May's low, located around 0.6900 and 0.6825, could function as barriers to the south. In the meanwhile, recovery is elusive till the price remains below the 200-day moving average (DMA) level near 0.7120. Consequently, the mentioned channel's support line appears to encounter immediate resistance near 0.6990.


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