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Market update: Australian dollar chopped up on jobs data as market eyes RBA action

The Australian dollar has recovered some lost ground on a good jobs report; the dial faintly clicked toward a hike of 0.50% by the RBA next month and US dollar gyrations continue to impact markets. Where to for AUD/USD?

The Australian dollar initially dipped then rallied after the jobs report today and the odds increased slightly for a 50-basis points hike by the RBA at their next meeting in October.

The August unemployment rate nudged higher to 3.5% against 3.4% forecast and previously.

The overall change in employment for the month was 33.5k instead of 35k anticipated. Full time employment increased 58.8k, while 25.3k part time jobs were lost in August.

The participation rate printed as expected at 66.6% but higher than 66.4% previously.

The reason for the unusual price action immediately after the number was the misreporting of the statistics by Bloomberg. Someone there might be in for a tough day. The initial flash had zero jobs added but the unemployment rate was correct at 3.5%.

Going into the data, the futures market had a 34 basis point (bp) lift in rates by the RBA priced in for October. Today’s data coaxed it up to 35 bp.

Elsewhere in the region today, New Zealand 2Q quarter-on-quarter GDP came in at 1.7%, way above forecasts of 1.0% and against the previous 0.2% .

New Zealand annual GDP to the end of July was 0.4% instead of 0.0% anticipated and 1.2% prior. The solid beat would seem to support a 50 bp hike by the RBNZ at their next meeting on 5th October.

The fallout from a red-hot US CPI number on Tuesday continues to permeate markets. The commodity and growth linked currencies like the Aussie and the Kiwi could be subject bouts of volatility as the market speculates on how hawkish the Fed will be at their meeting next week.

AUD/USD technical analysis

At the start of the week, AUD/USD challenged a descending trendline but was unable to overcome it and it may continue to offer resistance, currently dissecting at 0.6840.

The move lower in the wake of the US CPI report on Tuesday broke below three break points at 0.6771, 0.6841 and 0.6859. These levels could offer resistance.

That shift down created a Bearish Engulfing Candlestick. At the same time, the price is below all short, medium and long term Simple Moving Averages (SMA) and all SMAs display a negative gradient. This may suggest that bearish momentum could evolve.

Yesterday’s low of 0.6705 was above the prior lows at 0.6699 and 0.6681. All three lows stand above a break point at 0.6670. This might set up a support zone in the 0.6670 – 0.6705 area.

A move below that region could confirm bearish momentum.

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