AUD/USD bull's brows sweating at critical daily support ahead of Aussie unemployment data

AUD/USD has been testing the commitments of the bulls since the start of this week, initially pressuring the neckline of the H&S as risk-off markets w  |  22/01/2020 18:07
  • Committed bulls are anxious ahead of today's labour market report. 
  • Price is at critical daily support and runs the risk of a test below.
  • On a poor data outcome, the golden ratio will be a keen focus.
  • The RBA is tipped to cut rates on 4th Feb, opening prospects of a sustained bearish trend.

AUD/USD has been testing the commitments of the bulls since the start of this week, initially pressuring the neckline of the H&S as risk-off markets weigh on the price of the proxy currency. The hysteria of a virus pandemic gripped traders attention in the open on Friday, leading to a rout in Asian equities and subsequent follow-through in European and US markets.

Given the close proximity to China, Australian markets were also adversely affected leading to additional supply in the Aussie for which the bears received with open arms, taking the opportunity of a free lunch all the way to channel support in the lead in today's critical jobs report. 

In Asia, traders will be scrutinizing the Australian unemployment data for clues as to what the Reserve Bank of Australia's next move will be on the 4th February. As noted in yesterday's comprehensive analysis on the currency, in its Statement on Monetary Policy, the RBA clarified that “the Board is prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the medium-term inflation target over time”. The unemployment rate is a very important source of attention for the Board and is expected to drift higher over the coming half of the year.

Unemployment rate and stop territory (to 0.6780) in focus

Today's report will be monitored for such signals which will entice the RBA to act sooner than later. The unemployment stood at 5.2%last time around and is expected to remain there tonight, although some analysts are calling for a rise to 5.3% which would be a bearish factor for AUD and likely lead to a sharp trip to the downside, squeezing out stale and fresh sell stops which are accumulated below daily trend line support between 0.6820 and 0.6780 (the golden ratio 61.8%).

"Following the ~40k rise in headline employment in Nov, we are anticipating some giveback in Dec, with headline rising a milder +12k, which is line with the market. However we do expect the unemployment rate to edge higher to 5.3% in Dec. Job vacancies data suggests employment growth is likely to slow over coming months, keeping open the debate on RBA easing,"

analysts at TD Securities warned. 

Should the data offer some element of an upside surprise, then the bulls will be wiping their brows dry and encouraged to step up the gas towards safer territories, seeking to protect the rising channel's appeal and making some breathing room before the end of the month's critical Consumer Price Index data and the RBA meeting on the 4th of Feb. Judging by the latest COT data, the longs are increasing and the shorts are decreasing which should give some upside impetus ahead of the RBA. 

AUD/USD levels

In yesterday's analysis, the price was headed to the support of the channel which as subsequently held, as expected. That analysis can be seen here.

 

 

 

 

 

 

 

 

 

 

 

 

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