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Australian dollar looks past jobs report as Doji emerges

AUD/USD looked past a solid October Australian jobs report and sentiment remains a key driver for the Australian dollar after a Doji candlestick showed signs of indecision.

Source: Bloomberg

AUD/USD showed little reaction to October’s Australian jobs report, despite overall rosy figures. The country added about 32.2k jobs against economists’ expectations of 15.0k. Meanwhile, the unemployment rate dipped to 3.4% from 3.5% in September, projections were calling for a hold at 3.5%. There was a slight decline in labor force participation, which dipped to 66.5%.

At the end of the day, it seems that the data did little to alter the course markets are envisioning for the Reserve Bank of Australia and interest rates. Minutes from the central bank’s November policy meeting showed that the RBA is prepared to either pause or return to larger rate hikes ‘if the economy requires it’. While that seems like a neutral statement, keep in mind that markets care about relativity.

It was not that long ago that the central bank was moving forward with aggressive 50-basis point rate hike increments. Since then, that progress has slowed to 25 per meeting. That is translating to perhaps a longer tightening cycle, albeit one that is less aggressive. Considering that inflation surprised higher in the third quarter, it seems the RBA’s case is for price pressures to moderate ahead.

We will likely know more information from the December interest rate announcement. In the meantime, the sentiment-linked Australian dollar remains sensitive to how risk appetite may unfold heading into the last few days of the trading week. Fedspeak continues to be a key theme to watch. A number of officials noted that while the pace of tightening is likely to slow, more work is still needed. This might leave AUD/USD vulnerable if sentiment deteriorates as a result.

Australian dollar technical analysis

On the daily chart, AUD/USD is attempting to break above the falling trendline from April, albeit progress has been lackluster. On Wednesday, the pair left behind a neutral Doji candlestick pattern. This is a sign of indecision. A downward path from here could thus open the door to resuming the broader downtrend. In such an outcome, keep a close eye on the 0.6670 – 0.6715 inflection zone in the coming days.

AUD/USD daily chart

Source: TradingView

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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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