Global macro overview for 16/11/2017

The unemployment rate fell from 5.5% to 5.4%, while the most of market participants expected no change. This is a very good development, with the gradual reduction of spare capacity likely to eventually put pressure on wage growth again. Employment rose a modest 3.7k in October, following an upwardly revised gain of 27k in September (previously +20k). This continues the long run of monthly employment gains: this is the 13th straight monthly gain in jobs, the longest uninterrupted stretch since 1994 when the economy was dragging itself out of the very deep recession of the early 1990s. Full-time employment was strong as well with a rise of 24k against a fall of 21k in part-time jobs. This helped to drive another rise in hours worked (+0.3% m/m), which are now up 3.2% from October last year.

In conclusion, the improvement in the labour market is encouraging the further outlook in this sector of the Australian economy. The expansion in jobs growth is likely to continue (albeit at a more moderate pace) over the near term given the solid prospects for economic growth. Rising employment will support household income, but the spare capacity in the labour market must first be reduced before markets will see a meaningful acceleration in wages. This progression will lead to further appreciations of the Australian Dollar across the board.

Let's now take a look at the AUD/USD technical picture at the H4 time frame. The market is trading just above the important daily technical support at the level of 0.7570 in oversold conditions. Moreover, there is a Falling Wedge formation developing, which suggest a possible bounce towards the next technical resistance at the level of 0.7625. Only a sustained breakout above this level opens the road towards the important resistance at the level of 0.7732.

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