We saw a reasonable spike higher in AUD/USD overnight (02:15 AEST). Talk on the floor was that this was driven by a huge flow of around 27,000 short USD/JPY futures contracts (worth $3.3 billion) going through the market. Naturally this had negative ramifications on the USD all round, hence the move higher in AUD/USD. The greenback did not only lose ground to the AUD, but to other majors like the euro and pound. However, we have since seen some signs of stabilisation in the FX space, with the dollar regaining some ground against most of the majors.
Domestic jobs disappoint
Having said that, AUD crosses have been by far the most interesting to watch following a disappointing jobs reading. The local economy lost a net 300 jobs in July and the unemployment rate spiked to 6.4%. Both readings missed estimates by a mile, with the only glimmer of hope being the fact full-time jobs rose 14,500. Part-time jobs contracted quite sharply and presumably this has to do with contracts falling off at the end of the financial year. The participation rate also increased to 64.8%.
The result was an AUD/USD drop below the 0.9300 level, with the pair looking like it’ll retest the August 1 low at 0.9275 in the near term. A potential move to 0.9200 could be on the cards in the near term.
AUD/NZD encounters resistance
AUD/NZD was consolidating at a key level earlier, with the pair testing key resistance at the 50% retracement of the November to January drop. This level (1.1039) has now proved to be resistance as the pair rejected it on the back of the poor jobs numbers. The pullback could see the 38.2% retracement of the same move come into play. This support level currently lies at 1.0910 and could present some buying opportunities given the NZD is still structurally vulnerable to a deeper pullback.