The AUD/USD pair failed to take full advantage of the US dollar's general weakness: the Australian dollar stepped back after testing the level of 0.78. Buyers of AUD/USD were not able to gain a foothold above the resistance level of 0.7790 (Tenkan-sen line on the daily chart), but continued to assault this target. And if the dynamics of the pair is determined solely by the behavior of the US dollar right now, then tomorrow, the Australian dollar will show its intentions. During the Asian session on Thursday, the key data on the growth of the Australian labor market will be published, which may provoke increased volatility for the pair.
It can be recalled that the publication of the last Australia's Nonfarm data left a mixed impression: despite the decline in unemployment, the 70,000th growth in the number of employed was only because of the growth of the part-time component. At the same time, the full employment component turned out to be in the negative zone. This imbalance is negative. As already known, full-time positions tend to offer higher wages and higher levels of social security, so the increase in employment from the part-time component has put pressure on the Australian dollar.
According to preliminary forecasts, this trend may continue. In general, experts predict a quite weak result: the growth in the number of employees is expected to reach the 20-thousand mark . This indicator was released at the level of 70 thousand in March, and 90 thousand in February. On the other hand, a slight increase in the unemployment rate is also expected – according to general expectations, this figure will rise to 5.7% from the previous value of 5.6%. This fact will have rather symbolic significance, since unemployment has been declining for five consecutive months, from the 7% level reached in October 2020.
It is worth recalling that the April data will be released tomorrow, when the state subsidy program JobKeeper, which was used by about a million Australians, was no longer in effect. The government program ended at the end of March, and this fact will inevitably affect the main indicators of the labor market, naturally in a negative way. According to experts, about 100 thousand Australian residents will lose their jobs in the coming months mainly in the tourism industry and in the restaurant sector. In turn, this may lead to a decline in the incomes of many Australian families and, consequently, a slowdown in the growth of consumer spending, which is the impulse of the national economic recovery. Therefore, the "Australian Nonfarm" for April may come out in the "red zone", reflecting the slowdown in the recovery process.
The April data on the labor market is also important in the context of determining the prospects for the RBA's monetary policy. Just yesterday, the minutes of the May meeting of the Central Bank were published, which reminded traders of the main positions of the Australian regulator. The Central Bank confirmed once again that it does not expect a rate hike over the next three years – "not before 2024". At the same time, the July meeting will address the issue of extending the bond purchase program and the need to change the switch to bonds maturing in November 2024. The regulator also noted that "the highest priority of monetary policy is to return to full employment." It is clear that if tomorrow's release is released in the "red zone", the Australian dollar will be under strong pressure, as the probability of a QE curtailment will significantly fall.
At the moment, the Australian dollar stays above, maintaining its position in a flat near the borders of the 0.78 level. The weakness of the US currency does not allow the AUD/USD bears to strengthen and develop the downward impulse amid weak expectations for tomorrow's release. The US dollar index continues to be in the area of 5-month lows, within the 89th mark. The USD completely lost the positive momentum gained last week after the publication of the inflation release. The Fed's representatives were able to convince the market that this release will not change anything: the US regulator is ready to tolerate the sudden inflationary growth. The "control shot" was the disappointing US retail sales data and industrial production. In addition, the members of the Fed did not tire of reminding about the failed Nonfarm, which were published the week before last. In April, American unemployment increased, and the growth rate in the number of people employed in the non-agricultural sector did not meet the forecast values. It was 200+ thousand against the expected 900-thousand.
Thus, the current fundamental picture suggests that it is advisable to take a wait-and-see position for the pair. The inability of AUD/USD buyers to break through the resistance level of 0.7790 or rather, to consolidare above this level indicates the riskiness of longs. Moreover, tomorrow's release may put additional pressure on the Australian dollar. On the other hand, the general weakness of the US currency does not allow us to rely on the massive development of a downward movement. Considering such a contradictory fundamental background, it is recommended to make trading decisions following the release of data on the growth of the Australian labor market. Any deviation from the forecasted values will provoke increased volatility for the pair and in this case, the US dollar's condition will be secondary. The only question is whether it is in favor of the AUD or against it.
