Sat, May 28, 2022 @ 23:47 GMT
HomeContributorsFundamental AnalysisBumper AU Jobs Data and China Rate Cut Ignite AUDNZD

Bumper AU Jobs Data and China Rate Cut Ignite AUDNZD

Following an impressive gain of +366k jobs in November, the Australian economy added another +64.8k job in December. The seasonally adjusted unemployment rate fell to 4.2% from 4.6%, its lowest level since pre the Global Financial Crisis, August 2008

As noted in our preview yesterday, the survey reference period was November 28th to December 11th, pre the surge in Omicron cases in late December. As such, the impact of Omicron will not be seen until the January and February jobs data and result in a renewed, albeit temporary, hit to employment.

The recovery in the labour market sees the level of employment now 0.5% above pre-Delta levels. At this pace the unemployment rate is set to fall below 4% in the coming months and almost certainly spells the end to the RBA’s QE program in February.

During the second half of 2021, the Reserve Bank of Australia noted on many occasions that a tighter labour market was required to lift wages growth as a prerequisite to raising interest rates.

Based on today’s data, wages growth should accelerate towards 3% y/y by the second half of 2022, putting the start of an RBA tightening cycle firmly on the calendar for early in the second half of 2022.

The preferred way to play today’s robust jobs data is via long AUDNZD, which takes out of the equation some of the event risk of next week’s Federal Reserve meeting.

Additionally, it incorporates the benefits of Chinese policymakers taking further steps to meet their growth targets by cutting the one-year loan prime rate by 10 basis points to 3.7% and the five-year rate by 5 basis points to 4.6%. It is worth noting that when Chinese authorities set and reaffirm growth targets, they rarely miss them.

Technically, the break above resistance/congestion at 1.0650 allows the rally to extend towards the top of the six-month trend channel from the 1.1043 August high at 1.0820.

To take advantage of this view, use dips back towards 1.0665/45 to open longs in AUDNZD, looking to take profit 1.0800/20. Stops should be placed below the 2022 range lows at 1.0565.
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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