The land down under hired almost twice as estimated 15K in March; a whopping 37,700 new jobs- enough to bring unemployment rate down to 6.1%. The total number of employed Australians is at a new all-time record of 11,720,294.
Needless to say, Mr. Aussie is partying hard on the forex dance floor, and bringing the Kiwi dollar up with him as well.
But is it all too good to be true? Or is it just another temporary recovery?
Here are three reasons why this could be temporary:
1- Revisions Were based on Change of Survey System?
Fundamentally speaking, most of the positive revisions on this month’s jobs report may have simply been based on changes in survey methodology, since the Australian Bureau of Statistics has pointed out that a lot of adjustments were made to account for seasonality and to recalibrate benchmarks to the latest population estimates.
2- Rate Cut still on the Table
RBA Governor Glenn Stevens himself isn’t even convinced that Australia’s labor situation is getting better, since he already pointed out during their latest monetary policy statement that the economy is likely to operate with a degree of spare capacity for some time. With that, many forex market analysts are still expecting the central bank to announce another interest rate cut later on this year.
3- China’s Economy is Slowing
Investment in the mining industry, which is one of Australia’s major sources of growth, has been tumbling along with commodity prices. As I covered yesterday, Aussie’s trading buddy, China’s economy is slowing and therefore trade activity, particularly in terms of iron ore exports to China, also seems to be facing bleak prospects.
4- US Dollar is Strengthening
When looking at the AUD/USD pair in particular, it obviously takes two to tango. The 6 month drops we saw in the pair were not only because the lead of the pair (Mr. Aussie) is stumbling, but also because his counterpart, Ms. USA (AKA US dollar) is rising.
Despite the dismal NFP report last week, today we found out that US jobless claims in the US held below 300,000 for sixth consecutive week. Job listings have jumped reaching a 14 year high of 5.1 million in February, and many analysts believe that underlying economic expansion that is approaching its sixth anniversary, remains largely on track.
5- AUD/USD pair forming a Double Bottom
Technically speaking, although Mr. Aussie had his first 3-consecutive-day gains in 10 months against Ms. USA (US dollar,) the AUD/USD pair still has to dance their way through and above the Ichimoku cloud to prove a trend change.
How ever in a short term view, the pair seems to be forming a Double Bottom chart pattern with neckline and pivot point set at 0.79. With MACD indicator is heading up, a break above this level could bring the pair up to 0.8042 and 0.8317 in extension.