Strong data on the growth of the Australian labor market did not help the aussie: AUD/USD bulls could only retreat from the lows reached during the Asian session on Thursday, but the bears seized the initiative again at the start of the European session. The pair is already trading within the 75th figure, having updated 2.5-month lows. Here we can talk about the evil irony of fate: the Australian dollar got a chance to develop the upward trend on Thursday, but instead is forced to be under the yoke of dollar bulls. The results of the June Federal Reserve meeting provided significant support to the greenback, which strengthened its position throughout the market. And although the US central bank kept all the parameters of monetary policy in the same form, certain hawkish signals allowed dollar bulls to organize a large-scale rally. Therefore, the Australian report is a "deferred action" release. Today's publication will in any case become a "fundamental brick" - if not for the resumption of the upward trend, then at least in the context of a large-scale correction.
But at the moment, all the fundamental factors, even the most important ones, are ignored by traders. On the agenda – only the issue of tightening the parameters of the monetary policy of the Fed. Let me remind you that according to the Fed's point forecast, 13 of the 18 members of the US central bank spoke in favor of "at least one rate hike by the end of 2023." Back in March, only seven Fed members supported this scenario. In addition, according to the same median forecast, most members of the Fed (namely 11) now predict "at least two" increases by the end of 2023. At the same time, 7 of the 18 members of the Fed expect a rate hike in 2022 (in March, this scenario was supported by four members of the central bank).
Actually, this fact inspired the dollar bulls to reach new achievements. And although we are talking about rather distant prospects, the market is playing this message "here and now". Therefore, if we talk about the short-term, the aussie will still be in the shadow of the greenback. But still, in my opinion, the impact of the results of the Fed's June meeting will be limited – especially if we are talking about the AUD/USD pair. The latest Australian macroeconomic reports suggest that the Reserve Bank of Australia will also tighten its rhetoric at its next meeting in July. The corresponding expectations will provide background support for the aussie.
Returning to the Australian Nonfarm, it should be noted that all the components of the latest release came out in the green zone, that is, better than the forecast values. The May figures reflected the recovery in the Australian labor market, neutralizing the concerns of the RBA members voiced at the last meeting.
Thus, the unemployment rate in the country sharply fell – to 5.1%, although according to preliminary forecasts it should have remained at 6.5%. This indicator shows a downward trend for the seventh consecutive month, indicating "healthy trends" in the labor market. The last time unemployment was at this level was in February last year, that is, before Australia felt the first negative effects of the coronavirus crisis. Up to this point, this indicator has fluctuated in the range of 5.0%-5.4% for many months. In other words, unemployment has returned to pre-crisis levels, and significantly ahead of schedule. In particular, at the February meeting, the members of the RBA announced their forecast, according to which the unemployment rate this year is expected to be "in the region of 6 percent", while to the pre-crisis range of 5%-5.5%, this indicator, in their opinion, should return only in 2022. As you can see, the indicator is declining at a faster pace compared to the initial forecasts, returning to the aforementioned range at the start of the second half of the year.
It is also necessary to take note of the positive dynamics of the increase in the number of employed in May. The overall indicator also turned out to be better than forecasted, coming out at around 115,000 (with the forecast of growth by 30,000). However, the "highlight" here is different. The structure of this indicator suggests that overall growth was driven by full employment. Whereas part-time employment showed a rather weak result (ratio 97.5/17.5). At the same time, it is known that full-time positions, as a rule, offer a higher salary and a higher level of social security, compared to temporary part-time jobs. Therefore, the current dynamics in this regard is extremely positive.
Thus, the Australian labor market has once again demonstrated its positive qualities, allowing traders to count on a more optimistic mood on the part of the RBA members. But under the current conditions, AUD/USD bulls cannot take advantage of this fundamental factor, due to the hegemony of the US currency.
Nevertheless, in the medium and long term, long positions on the aussie are still relevant, even despite the surge in market interest in the US dollar. At the moment, the bears are trying to push through a rather powerful support level of 0.7750 (the lower line of the Bollinger Bands on the weekly chart). If the bulls hold this price outpost until the end of the week, then you can consider longs with 0.7670 as the main target (Tenkan-sen line on the daily chart).
