Open account
☰
Open account
✖

AUD/USD, ASX 200: Australia’s jobs report takes on greater significance for the RBA rate outlook

Article By: ,  Market Analyst
October 18, 2023 11:23 PM
  • Australia’s September labour force survey is released today
  • Unemployment is expected to hold steady at 3.7%
  • The RBA believes the jobs market has reached a turning point. That will have to be confirmed to diminish the risk of a further interest rate outlook.

Australia’s September obs report is arguably the most important G10 FX data release in the world today when it comes to the interest rate outlook from the Reserve Bank of Australia (RBA), ensuring there’ll be significant interest among AUD/USD and ASX 200 traders when it is released at 11.30am in Sydney.

The details on what to expect

When it comes to the volatile seasonally adjusted figures, markets are looking for employment to lift by 20,000 in September, a sharp deceleration from the 64,900 figure in August that was largely driven by part-time workers. While the rapid growth in Australia’s working age population means the economy needs to generate around 35,000 jobs per month just to keep unemployment steady, economists expect the national participation rate will decline by 0.1 percentage points, keeping the unemployment rate steady at 3.7%.

And what really matters for the ASX 200 and AUD/USD

While the seasonal adjusted series can and does generate significant volatility in the AUD/USD and ASX 200, providing scope for ultra-short-term traders to scalp a few ticks and points here and there, for longer-term traders and investors, what really matters is the unemployment rate, along with the underemployment and underutilisation rates which provide a more accurate guide on the degree of slack in the labour market. They have been trending higher since the middle of the year, allowing the RBA to pause its rate hike cycle and watch the lagged impact on incoming economic data.

Many analysts, including myself, deemed as likely to be permanent, with the next move in the cash rate likely to be a reduction at some point around the middle of next year. However, given hawkish remarks contained in the minutes of the RBA’s October monetary policy meeting released earlier this week, it has meant markets are likely to be hyper-sensitive to lead indicators that suggest inflationary pressures won’t moderate as fast as the RBA currently expects. This includes labour market slack given the flow-through effects to wage pressures, as the RBA discussed.

“Members observed that the labour market had reached a turning point as labour supply had picked up and labour demand had moderated,” it said. “The unemployment rate remained at 3.7% in August, slightly above the 50-year low of 3.5%. Underemployment had risen a little more noticeably, as had the youth and medium-term unemployment rates.”

Put simply, to diminish the risk of another hike or even hikes from the RBA this cycle, these indicators need to keep trending higher, especially today ahead of Australia’s Q3 CPI report next week.

AUD/USD setup

Looking at AUD/USD before today’s release, the price action and momentum indicators are giving off divergent signals right now, with the former setting lower-high after lower-high while RSI and MACD suggest the downside momentum is ebbing. Given the proximity to horizontal support at .6288 and downtrend resistance currently located just below .6400, you get the sense today’s report (or the conflict in Israel and Gaza), could easily see the AUD/USD breakout in either direction. If it’s support at .6288, .6170 would be the next downside target for traders to watch. Conversely, should downtrend resistance give way, a move back towards sellers parked above .6500 may be on the cards.

ASX 200 sits on major support

For the ASX 200, the index is sitting on support at 7000, suggesting today’s report could act as a potential catalyst for a swift move lower towards support at 69000 or bounce back towards resistance located above 7080. Given how negatively the index reacted to the RBA minutes earlier this week, a soft jobs report will likely assist the latter while a surprise decline in unemployment could easily spark further downside.

-- Written by David Scutt

Follow David on Twitter @scutty

 

How to trade with City Index

You can trade with City Index by following these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    • Open an account in the UK
    • Open an account in Australia
    • Open an account in Singapore

  2. Search for the market you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

© City Index 2024