Both of the Antipodeans report much better than expected job growth, catching the short-term market off guard and squeezing shorts. But for Australia in particular, the significance of the data is questionable.
The Australian jobs report was far stronger than expected – looking back over the data series we can clearly see these spikes on occasion, but it has been a while since one occurred. On virtually every occasion, the following month’s data mean reverts, either with a barely positive reading or an outright ugly negative one. To take the most recent example, the February payrolls growth was +72k to be followed by March’s -31k. In other words – the long term implications for the Australian economy are nil – but don’t tell that to folks (like me) that were short the Aussie into the data. As for the unemployment rate, it remains on an upward trend.
The market had gotten rather short of Aussie as key local support (trend-line and local flat-line) taken out, so the news saw a nasty gap squeeze higher as stops were tripped all the way up through 1.0250. This isn’t a game changer for the Aussie, in my view, but does make the local technical situation far more muddled if we hold higher here rather than slipping back lower quickly today, since the 1.0220 area was rather important resistance. If we stay up here, then the risk rises of an ugly range-fest back toward 1.0400, just below which we have the 200-day moving average.
Chart: AUDUSD
The rally suggests the massive longer-term range channel remains the key structure of note after the trend-line and local flat-line support breaks failed to follow through (so far, at least).
The New Zealand employment report was, if anything, even stronger than the Australian one as the as the unemployment rate plunged -0.6% to 6.2%. New Zealand data has remained generally very strong – taking the kiwi to nosebleed levels recently before the RBNZ was out saying that it had intervened at times recently. Looking at NZDUSD, we need a 0.8360 break for the bearish case to find confirmation, which after this data is only likely if we get particularly bad news out of China or a risk off move (or JPY rally or both).
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