Weak Employment Data Turns Against the Aussie Dollar

Weak Employment Data Turns Against the Aussie Dollar
August 16, 2018

 

Yesterday, the Australian Bureau of Statistics announced a 0.6% rise in the Wage Price Index in the June quarter, from the earlier quarter on a seasonally adjusted basis. The actual increase met analysts’ expectations and surpassed the previous quarter’s 0.5% rate of increase. However, poor employment change data and a fall in the price of commodities is not expected to support the current rally in the Aussie. 

 

Australia employment change

Earlier today, the Australian Bureau of Statistics (ABS) published the country’s most recent unemployment rate and employment change figures for July. The seasonally-adjusted unemployment rate was 5.3% – a notch better than analysts’ expectation of 5.4%. However, the month-over-month employment change data missed economists’ expectations of +15,000 job additions. In fact, the Australian economy lost 4,000 jobs in July, and labour participation decreased to 65.5%. 

Job losses are reflected in the bond market, with gains in the price of long-term bonds. The yield rate, which is inversely proportional to the bond prices, fell 1 basis point to 2.563% for 10-year bond. The yield on 30-year note also declined 1 basis point to 3.06%.  

 

Iron ore price decline

The price of iron ore fell 4% in the Chinese futures market to around $68 per ton for a 62% Fe grade. Furthermore, the Australian government stated that it expects iron ore prices to average $51.50 per ton this year, down 20% from 2017, mainly due to an increase in global supply and a decline in demand from major Chinese importers. This is a result of the country’s stringent pollution control rules resulting in a shutdown of mills with outdated technology.

 

US retail sales

The Commerce Department stated that retail sales grew 0.5% in July, which is a great deal higher than economist expectations of a 0.1% increase.  The report also indicated that the June retail sales growth of 0.5% was downwardly revised to 0.2%. Robust sales of motor vehicles and parts contributed to the strong rise in retail sales. Excluding the sales of vehicles, retail sales grew 0.6% in July, up from 0.2% increase in the earlier month. Devoid of auto sales figures, analysts had expected retail sales growth of just 0.3%.

 

Crude oil inventory

Finally, the price of crude oil fell more than 3% to $65.01 per barrel, after the US crude inventories increased unexpectedly last week. While the market was expecting crude to decrease by 2.6 million barrels, inventories rose by 6.8 million barrels. The information was published by the Energy Information Administration.

The US dollar has therefore had an inverse relationship with the price of crude oil, and strong retail sales data is expected to keep it bullish. Therefore, fundamental traders are in mind to support the decline of the AUDUSD pair. 

AUD - Technical Analysis - 16th August 2018

Technically, the stock has broken a descending triangle pattern (as shown in the chart above). The next major support exists only at 0.7140. So, a continuation of the current downtrend can be expected. 

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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