- Summary:
- AUDUSD heads to new weekly lows as data shows a decline in jobs and an increase in the unemployment rate. Does this mean more rate cuts from the RBA?
The Aussie dropped like a rock early in Asian trading after employment data for October sorely missed expectations. Market consensus was for an uptick in job growth of 16,200. However, the report for October showed that there was a 19,000 decline in the number of employed people for the month. Data for September was also revised lower to show that only 12,500 new jobs were created and not 14,700 as previously reported.
To make matters even worse for the Aussie, the unemployment rate ticked higher for October to 5.3% which reflects the decline in jobs from 5.2% in September.
Speculations that the Reserve Bank of Australia (RBA) would soon cut rates quickly swirled around markets. If you remember, the RBA has cut interest rates three times this year which suggests the central bank’s commitment to stimulating the economy.
Disappointing Chinese Data
It also did not help the Aussie that economic reports from China came in worse than expected.Chinese industrial production for October printed at 4.7% and missed forecasts for a 5.5% growth rate. Retail sales also disappointed at 7.2% versus the 7.8% consensus. Fixed asset investment grew by 5.2% from a year ago which was less than the forecasted 5.4% uptick.
This roster of disappointing data was bearish for the Aussie because China is Australia’s biggest trading partner. Therefore, a slowdown in the Chinese economy is seen as bad news because it could mean lower trading activity between the two countries.
AUDUSD Outlook
Consequently, the Aussie was sold-off across the board. AUDUSD dropped to its 4-week lows 0.6796 within an hour of the reports release. It was initially trading around its daily open price above 0.6830.
The currency pair is currently trading below support at the 0.6800 handle where it previously bounced in October 24. Should the sell-off continue, the daily time frame suggests that the next support level for the currency pair is around 0.6746 where it found support in August and mid-October.Download our latest quarterly market outlook for our longer-term trade ideas.