View of Sydney Harbour. Image source: Andrey Bayda © 123RF.com
The Australian Bureau of Statistics (ABS) reported a surprising fall in Australian unemployment for August, despite the reintroduced containment measures in Melbourne, the largest city in the state of Victoria.
The initial market forecasts were projecting another monthly hike in the overall number of unemployed persons by a total of 0.2 per cent. This would have meant an appreciation of the rate from the 7.5 per cent that was recorded in July to 7.7 per cent in August.
If these gloomy projections were realised, this would have meant a sixth consecutive month of deteriorating employment conditions, and a stagnating labour market.
Instead, headline unemployment was revised down to 6.8 per cent, which also surpassed the primary scenario for recovery of the Governing Council of the Reserve Bank of Australia.
Australia Unemployment Rate. Image source: TradingEconomics.com
This is more than welcoming news for the Council, which had to reconcile with a bigger-than-expected GDP contraction in the second quarter.
Labour market conditions are perceived as a key indicator for every economy in coping with the coronavirus crisis, which means that Australia is poised to undergo faster recovery than initially expected.
The Australian dollar reacted positively to the employment data by rebounding from a major support level against the greenback.
As can be seen on the 4H chart below, the AUDUSD pair continues to trade within the boundaries of a major Distribution range.
The underlying price action pulled back from the major support level at 0.72500, which serves as the lower boundary of the range. This retracement occurred after the market started heading lower, following the release of retail data in the US and the FED decision.
The underlying market sentiment remains mostly neutral, given the preceding failed attempt at forming a decisive breakdown. Meanwhile, the three moving averages retain a positive relationship to each other – the 10-day MA (in red) is positioned above the 30-day MA (in green), which, in turn, is placed above the 50-day MA (in blue).
Nevertheless, if the price action does manage to break down below 0.72500 decisively, this would mean that the Distribution range would be completed, clearing the way for the market to establish a new Markdown. Such assertions are confirmed by the ongoing strengthening of the greenback.
The minor support level at 0.71400 encapsulates the first target level for such a new trend.
AUDUSD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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