AUD drops on Employment Figures

The Aussie Dollar has seen a drop in its price due to wage and unemployment data released over the past day and a half. The economic data shows that unemployment has fallen to its lowest level in nearly 50 years with the jobless rate at 3.4% compared to analysts expecting the figure to remain at 3.5%. Wages also rose modestly in the last quarter to 2.7%, however this is still a far cry from the 6.1% inflation figure. The AUD’s weakness came on the removal of 40,900 roles from the economy vs the previous month as opposed to expectations of a gain of 25,000. The report indicates that the labour market might just be starting to feel the pinch and that growth is beginning to slow. These figures give the RBA more flexibility in its next cash rate decision with the option for a 25 bps rise instead of 50 bps now being a realistic possibility after 3 consecutive 50 bps raises.

In response the Aussie dollar dipped against most of the main currencies. It fell back below 0.70 USD after a recent rally, to 0.6801 Euros and to 0.659 CHF. With the currency experiencing negative sentiment due to the employment figures and recessionary fears pushing commodity prices lower, there is an opportunity for a short trade. Specifically with the recent strength of the CHF compared to the general weakness s of the AUD, it represents the best opportunity for a trade.

The current price is sitting just near the last level of support at 0.6584 CHF, providing a potential entry point. If this level fails to hold then it is possible that the price may drop to 0.6509, which is the first price target. The current pattern of the MACD also supports this trade. The last time the price was at this level of support the MACD Moving Averages had already found support. However, on this occasion, the Moving Averages are still accelerating to the downside indicating that there may be more selling to be done. The trade involves placing a stop loss just above 0.66 CHF to reduce the potential loss if the trade does go as expected for a Risk Reward of close to 3.