Dollar gain Traction After Weak Aussie Jobs Report
The dollar gain ground against most major currency’s on Thursday, especially against the Australian dollar which had seen robust gains over the past few trading session. The currency from down under was hammered on the back of a worse than expected employment report which ignited concerns that the RBA would move to cut interest rates. CPI in the Eurozone came in slightly lower than expected, allowing the greenback to gain traction.
The EU Consumer Price Index increased 0.8% year over year in December, slightly slower than the 0.9% increase in November. Inflation remains well below the ECB’s target of just under 2% amid concerns that Europe faces the threat of deflation.
The Australian government released a soft employment report that generated discussion of a Reserve Bank of Australia interest rate cut. The Australian economy lost a net 22,600 jobs in December. The consensus forecast a 10,000 job increase. The November employment number was revised to show a 15,400 gain instead of the initial 21,000 increase. Australia lost 31,000 full-time jobs in December and the downward revision to the November report reflects almost exclusively full-time jobs.
Barring a significant upside surprise with next week’s Q4 CPI figures, it is likely that the RBA will lean toward a rate cut.
The AUDUSD sliced through support levels near 0.8830, and will likely continue to move lower toward monthly target support near the 2009 lows at 0.80. Resistance is seen near the 10-day moving average near 0.8930.
Momentum on the currency pair is negative with the MACD (moving average convergence divergence) index generating a sell signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crossed below the 9-day moving average of the spread. The index has moved from positive to negative territory confirming the sell signal. The RSI moved lower with price action reflecting accelerating negative momentum.
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