AUD volatile on jobs data

The main theme in the FX space was a reversal of the US dollar weakness we had seen in the previous session.

US treasuries lost ground on speculation that less headwinds on the fiscal front will lead to the Fed winding back on asset purchases soon. Commodity currencies were perhaps the biggest hit by the greenback recovery, with AUD/USD taking a bath. AUD/USD traded as high as 0.9167 yesterday, but was greeted by sellers and has since dropped back to 0.905. The local currency was back in focus today with traders focusing on jobs numbers for some direction. Local jobs numbers released at 11.30am showed a much better-than-expected employment change, with 21,000 jobs added (versus 10,000 expected). The unemployment rate was in-line with consensus at 5.8%, while the participation rate was flat at 64.8%.

Traders selling AUD into strength

The initial reaction to the jobs numbers was actually positive, with AUD/USD spiking to a high of 0.908. However, these gains didn’t last long as traders continue to favour selling the AUD into strength. The Holden shutdown has seen investors putting a lot into perspective and prompted the risk of action by officials to lower the AUD. The pair has traded as low as 0.9023 in Asia and remains under pressure ahead of a key support level. It recently traded to as low as 0.8990 and we know there have been good bids coming in on moves below the 0.90 handle. A breach of the 0.8990 level will leave traders facing August lows at 0.8848 for support.

NZD gains against the AUD

Just weighing up some moves between commodity currencies, the decline in AUD/NZD has continued today and it traded at its lowest since October 2008. AUD/NZD is testing 1.09 with the market focusing on New Zealand’s central bank meeting. The RBNZ kept rates on hold as expected, but left the door open for a January hike. It revised its growth forecasts higher and raised the bank bill profile by 1 to 2 basis points. With fundamentals between the AUD and NZD continuing to diverge, there is certainly still room for further falls in AUD/NZD. The October low was 1.087 and I feel that will be the next key level to look out for.

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