AUD/USD. Declining unemployment and rising commodity market

Australia's macroeconomic reports supported the Australian dollar during the Asian session. In particular, the key labor market data came out either at the forecast level or in the "green" zone, reflecting the recovery of this sector of the economy. In this case, the Aussie reacted correspondingly – buyers of AUD/USD headed to the level of 0.78, actively recovering the previously lost positions. The growth of the pair is also due to the weakness of the US currency: the US dollar index continues to decline, although it still holds above the 90th mark.


However, the main driver for today's growth is clearly the Australian Nonfarm. The data on the labor market are important, but the published indicators should also be considered through the prism of the prospects for monetary policy in the light of RBA's latest statements. Moreover, it is worth noting that the Australian regulator currently has every reason to maintain the status quo. They will consider today's data at least until the next meeting on February 2, indicating the recovery of the Green Continent's economy.

According to general forecasts, December's unemployment rate is expected to decline from the past value of 6.8% to 6.7%. This indicator has indeed declined, but one step lower – to 6.6%. This is the best result since April last year, when the Australian labor market reacted to the first quarantine restrictions. After that, the indicator sharply rose from 5.2% to 6.4%, and has not fallen below this target since then.

Another sector of today's release is the growth rate in the number of employees, which fully coincided with analysts' optimistic forecasts. This indicator came out at around 90 thousand in November, with a growth rate of 180 thousand last October. In September, it declined in the negative zone, as Australia experienced another wave of COVID-19 crisis. To simply put it, it sharply rose after the indicator plummeted below zero, then showed a general decline over the next two months, although it came out at relatively high values. Based on experts' expectations, this indicator should have shown a positive trend in December – an increase by 50 thousand. In this part, the forecasts coincided with the current condition: the indicator increased at exactly in this value.

It is also worth emphasizing that the growth in the number of employed in December was mainly due to the growth of full employment: the indicator of full employment rose by 35.7 thousand, while partial employment was by 14.3 thousand. It is believed that the growth in the number of full-time positions in the future will positively affect the consumer activity of Australians, and ultimately the inflationary processes. Therefore, today's result is also positive in this aspect. In addition, the share of the economically active population has increased to 66.2%, which is the best result since September 2019.

It should also be recalled that Central Bank members expressed their concern during RBA's last (December) meeting. They said that labor market indicators are recovering at an "uneven" pace. According to the calculations of the Central Bank's economists, the country will still need years for unemployment to fall to the "pre-crisis" level, that is, in the range of 4.5-5.2%. At the same time, regulatory members were concerned about the growth of the indicator of part-time employment. The RBA has indicated that if the labor market does not show signs of a sustained recovery in the near future, the regulator will consider expanding the stimulus program.




It should be noted that the RBA's meeting in December was held even before the data on labor market growth for November was published. In other words, the first meeting of the RBA members this year (February) will be held under the recovery sign of the main indicators of the labor market. It is very likely that the Central Bank will maintain a wait-and-see attitude, noting the above positive trends.

The commodity market, in turn, also provides indirect support to the Australian currency. The cost of a ton of iron ore (a strategically important commodity for the Australian economy) rose to $ 170, which was at the level of $ 120 in October-November. Industry experts say that prices for ore increased on the back of annual growth in China's national GDP and steel production, which improved the prospects for demand for raw materials for investors.

Technically, the pair in the daily time frame is between the middle and upper lines of the Bollinger Bands indicator, as well as above all the lines of the Ichimoku indicator, which is still showing the bullish "parade lines" signal. All this suggests that the pair retains its potential to further rise, at least to the first resistance level of 0.7830 (upper line of the Bollinger Bands indicator on D1).

The material has been provided by InstaForex Company -