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Australian Dollar tumbles broadly today as weak employment data solidifies the case for more RBA rate cut ahead. The headline number might be strong but the details are generally weak. The Aussie is also generally pressured by mild risk aversion in Asian markets. For now, Dollar is following Aussie as the second weakest, then Sterling. On the other hand, Yen is the strongest one, followed by Swiss Franc.

Technically, today's steep fall in AUD/USD affirms the case that recovery from 0.6864 has completed at 0.7022. And larger decline from 0.7295 is likely resuming. EUR/AUD is on track to 1.6410 projection level first, and then 1.6631 next. AUD/JPY's break of 74.96 support confirms fall resumption from 80.71 for 74.25 near term retracement level. Yen crosses will be worth the watch today. Break of 122.10 minor support in EUR/JPY will indicate completion of corrective recovery from 120.78. Break of 107.81 in USD/JPY and 136.55 in GBP/JPY will indicate resumption of recent declines.

In other markets, Nikkei closed down -0.55%. Hong Kong HSI is down -0.82%. China Shanghai SSE is up 0.10%. Singapore Strait Times is down -0.18%. Japan 10-year JGB yield is up 0.0011 at -0.11. Overnight, DOWN dropped -0.17%. S&P 500 dropped -0.20%. NASDAQ dropped -0.38%. 10-year yield dropped -0.013 to 2.127.

Australian employment data shows much slack remains, affirms RBA cut path

Australia employment rose 42.3k in May, well over expectation of 16.0k. However, the growth was mainly driven by 39.8k addition in part-time jobs. Full-employment rose merely 2.4k. Monthly hours worked in all jobs also decreased by -0.3%. Unemployment rate was steady at 5.2% , above expectation of 5.1%. Participation rate rose 0.1% to 66.0%.

In seasonally adjusted terms, the largest increase in employment was in New South Wales (up 38.5k), followed by Victoria (up 28.6k) and Queensland (up 7.8k). The only decreases were in Western Australia (down -4.0k) and Tasmania (down -0.4k).

The data suggests that there is still considerable slack in the labor market. According to recent comments from RBA Assistant Governor Luci Ellis, unemployment could need to be pushed down to as low as 4.5% before material uplift in wage pressure and inflation. There's still a long way to go for the central bank, which is on track for more rate cuts this year.

Also from Australia, consumer inflation expectation was unchanged at 3.3% in June.

Chinese officials delivered bullish comments, but interest rate and RRR cut said to be underway

At a financial forum in Shanghai, Chinese Vice Premier Liu He said there are plenty of policy tools to use to deal with the challenges the economy is facing. He also sounded confidence and said major macroeconomic indicators all remain within reasonable ranges. Meanwhile, China will roll out more strong measures on reforms in the near future.

In the same forum, Pan Gongsheng, head of the State Administration of Foreign Exchange, said the country's FX market is largely stable with FX reserves steadily rising. And, China is capable and confident of keeping its currency basically stable. Guo Shuqing, head of the China Banking and Insurance Regulatory Commission (CBIRC) reiterated there are plans to further open up its banking securities and insurance sectors.

Separately, the official China Daily said that more money and credit supply adjustment are under way to counter the downside risks of trade war. Measures could include cuts in interest rates or reserve ratio requirements. The newspaper noted the near for stronger measures to maintain liquidity in the financial market and support infrastructure investment

From Japan, BSI manufacturing index dropped to -10.4 in Q2. Tertiary industry index rose 0.8% mom in April versus expectation of 0.4% mom.

UK RICS house price balance rose to -10, but anecdotal insight shows political and economic concerns

UK RICS House Price Balance improved to -10 in May, up from -22. That is, 10% more respondents saw a fall rather than rise in May. This would indicate a deceleration in the pace of price declines in six months time.

Simon Rubinsohn, RICS Chief Economist, said: "Some comfort can be drawn from the results of the latest RICS survey as it suggests that the housing market in aggregate may be steading. However much of the anecdotal insight provided by respondents is still quite cautious, reflecting concerns about both the underlying political and economic climate."

Fed will hold interest rates this year according to consensus of a Reuters poll

According to a Reuters poll in June 7-12 period over 100 economists, consensus is that Fed will hold interest rates at current 2.25-2.50% this year. However, median from a smaller sample showed 55% of one Fed cut this year, 40% for two. The median chance of a recession in the next 12 months increased slightly by 5% to 30%. But the range from 10% to 80% is huge. For the next two years, median chance stood at 40%, with range from 10% to 90%.

Opinions are divided as some point out that concerns are mainly on the risks to economic outlook, rather than the outlook. And the risks and uncertainty could turn out to be a lot weaker. Fed's decision remain data dependent and some strong numbers could push out a possible July rate cut. Meanwhile Fed could resume rate hikes next year should the risks not materialize.

However, the probability of a recession has risen due to trade tensions. The next round of tariffs against China is the "big, big concern". Some expected recession in second half of 2020 and an insurance rate cut by Fed is seen as not enough in this case. Fed could be forced to start a full blown cutting cycle next year.

Looking ahead

SNB rate decision will be a major focus in European session. Sight deposit rate is expected to be held at -0.75%. Libor range to be held at -1.25% to -0.25%. SNB will very likely reiterate the need for negative interest rate policy and readiness to intervene in the currency markets. So, there is little surprise expected from the even. Swiss will also release PPI. Eurozone will release industrial production. Later in the day, US jobless claims and import price will be released. Canada will release new housing price index.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.6913; (P) 0.6939; (R1) 0.6953; More...

Intraday bias in AUD/USD remains on the downside for retesting 0.6864. Corrective recovery from 0.6864 should have completed at 0.7022 after rejection by 55 day EMA. Break of 0.6864 will resume the decline fro 0.7295 for retesting 0.6722 low. On the upside, above 0.6965 minor resistance will mix up the near term outlook and turn intraday bias neutral first.

In the bigger picture, with 0.7393 key resistance intact, medium term outlook remains bearish. The decline from 0.8135 (2018 high) is seen as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

Economic Indicators Update

For the 24 hours to 23:00 GMT, the USD rose 0.27% against the CHF and closed at 0.9952.

In the Asian session, at GMT0300, the pair is trading at 0.9942, with the USD trading 0.10% lower against the CHF from yesterday’s close.

The pair is expected to find support at 0.9910, and a fall through could take it to the next support level of 0.9879. The pair is expected to find its first resistance at 0.9966, and a rise through could take it to the next resistance level of 0.9991.

Trading trend in the Swiss Franc today, is expected to be determined by the Swiss National Bank interest rate decision followed by Switzerland’s producer & import prices for May, scheduled to release in a while.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD rose 0.40% against the CAD and closed at 1.3336.

In the Asian session, at GMT0300, the pair is trading at 1.3336, with the USD trading flat against the CAD from yesterday’s close.

The pair is expected to find support at 1.3292, and a fall through could take it to the next support level of 1.3247. The pair is expected to find its first resistance at 1.3363, and a rise through could take it to the next resistance level of 1.3389.

Looking forward, traders would closely monitor Canada’s new housing price index for April, slated to release later in the day.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the AUD declined 0.42% against the USD and closed at 0.6932.

LME Copper prices declined 1.3% or $76.5/MT to $5828.5/MT. Aluminium prices declined 0.1% or $1.0/MT to $1753.5/MT.

In the Asian session, at GMT0300, the pair is trading at 0.6911, with the AUD trading 0.30% lower against the USD from yesterday's close.

Overnight data indicated that Australia's consumer inflation expectations remained unchanged at 3.3% in June. Moreover, the nation's seasonally adjusted unemployment rate remained steady at 5.2% in May, defying market expectations for a drop to 5.1%.

The pair is expected to find support at 0.6896, and a fall through could take it to the next support level of 0.6880. The pair is expected to find its first resistance at 0.6942, and a rise through could take it to the next resistance level of 0.6972.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, Gold rose 0.50% against the USD and closed at USD1337.50 per ounce, amid escalating US-China trade tensions and expectations of interest rate cut by the US Federal Reserve.

In the Asian session, at GMT0300, the pair is trading at 1340.30, with gold trading 0.21% higher against the USD from yesterday’s close.

The pair is expected to find support at 1334.43, and a fall through could take it to the next support level of 1328.57. The pair is expected to find its first resistance at 1344.23, and a rise through could take it to the next resistance level of 1348.17.

The yellow metal is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, Silver rose 0.14% against the USD and closed at USD14.75 per ounce, tracking gains in gold prices.

In the Asian session, at GMT0300, the pair is trading at 14.77, with silver trading 0.14% higher against the USD from yesterday’s close.

The pair is expected to find support at 14.71, and a fall through could take it to the next support level of 14.64. The pair is expected to find its first resistance at 14.85, and a rise through could take it to the next resistance level of 14.92.

The white metal is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

For the 24 hours to 23:00 GMT, Crude Oil declined 3.22% against the USD and closed at USD51.14 per barrel, after the Energy Information Administration (EIA) report indicated that US crude oil stockpiles rose by 2.2 million barrels to 485.5 million in the week ended 07 June 2019.

In the Asian session, at GMT0300, the pair is trading at 51.06, with oil trading 0.16% lower against the USD from yesterday’s close.

The pair is expected to find support at 50.36, and a fall through could take it to the next support level of 49.65. The pair is expected to find its first resistance at 52.13, and a rise through could take it to the next resistance level of 53.19.

Crude oil is trading below its 20 Hr and 50 Hr moving averages.

Key Highlights

• The Aussie Dollar declined sharply below the 0.6980 support level against the US Dollar.
• AUD/USD traded below a major bullish trend line with support at 0.6955 on the 4-hours chart.
• Australia’s unemployment rate remained at 5.2% in May 2019, whereas the market was looking for a drop to 5.1%.
• The US Initial Jobless Claims for the week ending June 08, 2019 could decline from 218K to 217K.

AUDUSD Technical Analysis

The Aussie Dollar failed again to gain momentum above 0.7000 against the US Dollar. The AUD/USD pair topped near 0.7020 and recently started a major downward move.

Looking at the 4-hours chart, the pair gained bearish momentum below the 0.7000 and 0.6980 support levels. There was a sharp decline after there was a close below the 0.6950 and the 200 simple moving average (green, 4-hours).

The pair traded below a major bullish trend line with support at 0.6955 on the same chart. Moreover, there was a break below the 0.6935 support and the 100 simple moving average (red, 4-hours).

Finally, there was a break below the 76.4% Fib retracement level of the upward move from the 0.6899 low to 0.7022 high. Therefore, there is a risk of more losses in the near term towards 0.6900.

If there is a downside break below 0.6900 and the last low at 0.6899, the pair could decline towards the 0.6870 or the 1.236 Fib extension level of the upward move from the 0.6899 low to 0.7022 high.

On the upside, there are many resistances near the 0.6925, 0.6935 and 0.6940 levels. A successful close above 0.6940 and the 100 simple moving average (red, 4-hours) is must for a decent recovery in AUD/USD.

Fundamentally, the Australian Employment Change figure was released by the Australian Bureau of Statistics. The market was looking for a 17.5K change in May 2019.

The actual result was mixed as the Employment changed 42.3K, but there was no drop in the unemployment rate from 5.2% to 5.1% (as per the market forecast).

The report stated that:

Employment increased 42,300 to 12,868,200 persons. Full-time employment increased 2,400 to 8,792,900 persons and part-time employment increased 39,800 to 4,075,400 persons.

Overall, the market did not like the outcome, resulting in a sharp drop. There could be a final downward push in AUD/USD towards 0.6900 or 0.6870 before it starts a decent upward move.

Economic Releases to Watch Today

• SNB Interest Rate Decision – Forecast -0.75%, versus -0.75% previous.
• US Initial Jobless Claims – Forecast 217K, versus 218K previous.

Australia employment rose 42.3k in May, well over expectation of 16.0k. However, the growth was mainly driven by 39.8k addition in part-time jobs. Full-employment rose merely 2.4k. Monthly hours worked in all jobs also decreased by -0.3%. Unemployment rate was steady at 5.2% , above expectation of 5.1%. Participation rate rose 0.1% to 66.0%.

In seasonally adjusted terms, the largest increase in employment was in New South Wales (up 38.5k), followed by Victoria (up 28.6k) and Queensland (up 7.8k). The only decreases were in Western Australia (down -4.0k) and Tasmania (down -0.4k).

The data suggests that there is still considerable slack in the labor market. According to recent comments from RBA Assistant Governor Luci Ellis, unemployment could need to be pushed down to as low as 4.5% before material uplift in wage pressure and inflation. There's still a long way to go for the central bank, which is on track for more rate cuts this year.

AUD/USD drops sharply today, reaffirming the case that corrective recovery from 0.6864 has completed at 0.7022. Retest of 0.6864 should be seen next and break will resume larger decline from 0.7295.

AUD/USD's break of 74.96 support confirms resumption of decline from 80.71. Outlook will stay bearish as long as 76.01 resistance holds. Next target is 61.8% retracement of 70.27 to 80.71 at 74.25. Sustained break there will pave the way back to retest 70.27 flash crash low.

The report from the US Energy Information Administration (EIA) shows that total crude oil and petroleum products (ex. SPR) stocks rose another week, by +9.56 mmb to 1317.18 mmb in the week ended June 7. Crude oil inventory gained +2.21 mmb to 485.47 mmb (consensus: -0.48 mmb). Inventories rose in 3 out of 5 PADDs. Stockpile in PADD2 (Midwest) alone gained +1.9 mmb during the week. Utilization rate climbed +1.4% to 93.2% while crude production slipped -0.1M bpd to 12.3M bpd for the week. Crude oil imports dropped -0.32M bpd to 7.61M bpd in the week.Concerning refined oil product inventories, gasoline inventory gained +0.76 mmb to 234.91 mmb although demand jumped +4.62% to 9.88M bpd. The market had anticipated a +0.74 mmb increase in stockpile. Production rose +1.29% to 10.25 bpd while imports plunged -36.07% to 0.7M bpd during the week. Distillate inventory declined -1 mmb, to 128.37 mmb. Demand spared +28.96% to 4.37M bpd. The market had anticipated a +1.14 mmb gain in inventory. Production fell -3.05% to 5.24M bpd while imports gained +8.85% to 0.12M bpd during the week.

Released after market close on Thursday, the industry- sponsored API estimated that crude oil inventory rose +4.85 mmb during the week. For refined oil products, gasoline stockpile added +0.83mmb while distillate fell -3.46 mmb.