Aussie’s horizontal move may change after strong employment report – Forex News Preview


Melina Deltas, XM Investment Research Desk

The aussie has been moving sideways over the last three weeks with the employment report for March, due out on Thursday at 00:30 GMT, likely to attract some attention. The recession in Australia is over as the economic indicators have turned positive; however, the recovery still has a long way to go. However, unemployment is expected to return to pre-pandemic levels faster than expected.

Unemployment rate predicted to plunge further

The unemployment rate is forecasted to fall even lower to 5.7% from 5.8% before. This was the lowest jobless rate since March, as the economy recovers gradually from the coronavirus pandemic. However, in March, the economy is predicted to have added 35k from 88.7k in the previous month. The nation’s economy is predicted to take off faster than expected, reaching its pre-pandemic levels within the next releases, but it will continue to announce low interest rates for the next few years.

RBA holds cash rate at record lows

At the April 6th meeting, the Reserve Bank of Australia left its cash rate steady at 0.1% for the fifth consecutive month, as expected. Policymakers confirmed once again their pledge to highly supportive monetary conditions for the next three years until inflation holds within the 2% to 3% target. CPI is forecasted to rise momentarily because of the reversal of some coronavirus related price reductions. In terms of housing prices, the RBA mentioned that it will closely monitor borrowing and stressed the importance of maintaining lending standards.

Aussie is steady around 0.7600

In FX market, aussie/dollar is moving horizontally, holding above the crucial support of 0.7570 over the last three weeks. If the unemployment rate falls further, as expected, the bulls may take the market up towards the 40-day simple moving average (SMA) currently at 0.7710 ahead of the 0.7940 barrier. Steeper upside movements could open the way for the more-than-three-year high of 0.8006.

On the other hand, the price could be at risk of further bearish movement if the employment report disappoints. Price action is likely to slip below 0.7570 and touch the 0.7464 barrier ahead of the 23.6% Fibonacci retracement level of the up leg from 0.5505 to 0.8006 at 0.7415, which overlaps with the 200-day SMA. A leg lower could open the door for the 38.2% Fibonacci of 0.7415, shifting the bias to bearish.

In conclusion, combined with the global vaccine rollouts and the growing expectation of a swift, full recovery, Australia’s domestic strength is encouraging the consumer to maintain an optimistic outlook.