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Weak Employment Erodes AUDUSD

David Becker
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Weak Employment Erodes AUDUSD

The Australian dollar is trading under pressure after hitting a two-month lows just under 0.9260 earlier in the day, extending the post Australian employment report low. The July employment report headline came in worse than expected. The Aussie interest rate swaps market is now discounting 38% odds for an RBA rate cut by December, up from 16% before the data release. Weakness in global stocks and risk appetite on Ukraine related concerns is an added negative for the high beta Aussie.

Australia employment dipped 0.3k in July, bucking expectations for a modest increase. The rise followed a revised 14.9k increase in June, which was 15.9k. The details were mixed, as full time jobs rose 14.5k after a 3.9k June dip. Part time positions fell 14.8k after an 18.8k increase in June. The unemployment rate rose to 6.4% in July, following the 6.0% rate in June for the third monthly increase. The participation rate rose to 64.8% in July from the 64.7% rate seen in June as the measure has remained below the narrow 65.1%-65.4% range since November of 2011.

The currency pair pushed below support level near 0.9280, and are poised to test eh 200-day moving average near 0.9178. With the 10-day moving average crossing below the 100-day moving average, a short term down trend is considered in place. The MACD (moving average convergence divergence) index recently generated a sell signal, where the spread (the 12-day moving average minus the 26-day moving average) crossed below the 9-day moving average of the spread. The relative strength index (RSI) moved lower with price action reflecting accelerating negative momentum, while printing near 40, which is the lower end of the neutral range.

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