AUDUSD Jumps as Australia’s Labor Data Top Forecasts But Here’s Why It Could Still Drop

Summary:
• AUDUSD traded higher today as the labor figures from Australia beat market forecasts and the unemployment rate dropped. But here's why it could still fall.

Positive Labor Figures from Australia

AUDUSD traded higher in today’s Asian session following the better-than-expected jobs report from Australia. The currency pair was initially trading at 0.6839 and surged to 0.6877 at the wake of the data’s release. According to the Australian Bureau of Statistics, there were 28,900 jobs generated in December. This figure was more than twice the forecast which was only at 12,200. Consequently, Australia’s unemployment rate dropped from 5.2% in November to 5.1% last month. It also came in as a pleasant surprise because the consensus was for it to have remained steady.

No Rate Cut from the RBA Anytime Soon?

Consequently, market participants re-adjusted their expectations of a rate cut from the RBA. Prior to the report, there seemed to be a general consensus that the central bank would announce a rate cut next week or in February. Now that the unemployment rate is closer to the RBA’s 4.5% target, experts say that the earliest rate cut may happen in March. That is, if data deteriorates.

It’s worth noting, however, that most of the job gains were on part-time employment. This may help explain why the rally on AUDUSD was not sustained.

Read our Best Trading Ideas for 2020.

AUDUSD Outlook

Double Bottom on H1

On the hourly time frame, we can see that there were enough buyers at 0.6830 to push AUDUSD higher. A double bottom chart pattern has now materialized. When you enrol to our forex trading course, you will learn that this is considered as a bullish indicator. A bullish close above today’s Asian session highs at 0.6877 could mean that AUDUSD may soon rally to its January 16 highs at 0.6930.

Head and Shoulders Still Intact

If there are still sellers in the market, we could see the currency pair retest the neckline of the double bottom. This price, at 0.6850, also coincides with the 61.8% Fib level (drawing from yesterday’s low to today’s high). However, if support does not hold, we could see an even bigger drop on AUDUSD. Remember that on the daily time frame, the head and shoulders pattern is still intact. The currency pair is already trading below neckline resistance. A close below yesterday’s low may mean that AUDUSD could soon fall to its November 2019 lows at 0.6760.