City of Sydney. Cityscape image of Sydney, Australia during sunrise. Image source: rudi1976 © 123RF.com
Earlier today, the Australian Bureau of Statistics (ABS) released its July labour survey. It was revealed that the Australian economy had added 114 thousand new jobs the previous month, thereby far surpassing the initial expectations of only 30 thousand new positions.
The unemployment rate edged up by 0.1 per cent from the 7.4 per cent that was registered in June. The minor increase in unemployment to 7.5 per cent is still welcoming news compared to the consensus forecasts that were anticipating a more drastic surge to 7.8 per cent.
Australia Unemployment Rate. Image source: TradingEconomics.com
The Australian labour market continues to reel from the coronavirus crisis and a recent resurgence in the number of COVID-19 cases poses a serious threat to its future stability.
Even still, the damage from the pandemic has had a lesser impact on Australia's employment conditions compared to earlier estimations, which would provide the RBA with some breathing space.
Right now, the fears of a second epidemic wave, coupled with downwardly revised prospects for global recovery could jeopardise RBA's previous efforts. The Governing Council of the Bank should consider ramping up its asset purchase facility in order to prepare the financial sector for a new economic downturn in the third quarter.
Meanwhile, the Australian dollar reacted positively to the smaller-than-expected increase in unemployment immediately following the publication of ABS' labour survey; however, the Aussie promptly reverted itself afterwards.
As can be seen on the hourly chart below, the AUDUSD tested breaking out above the minor resistance level at 0.71800 following the release of the employment numbers, but then it quickly fell back.
As the underlying bullish momentum appears to be waning in the short-term, the bears could take back control, and the AUDUSD is likely to attempt forming a new downswing.
These expectations are supported by the fact that the price action has already formed a double top pattern, which typically entails rising bearish sentiment in the market.
Following the breakdown below the double top's neckline, the price action went on to establish three separate throwbacks to the neckline, which is represented by the aforementioned resistance level.
Since the price action failed to break out above it once again, there is pretty compelling evidence supporting the expectations of mounting bearish pressure, and the formation of a new sizable downswing.
AUDUSD 1H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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