The AUD/USD currency pair is steadily recovering lost positions. On Monday, the Aussie hit a three-week price low, marking 0.6622, but then turned 180 degrees and headed upward again. The upward dynamics of AUD/USD is due not only to the weakening of the greenback but also to the strengthening of the Australian currency. And the labor market data for Australia published today only reinforced the upward trend.
Although today's release did not change the RBA's wait-and-see position (in the medium term), its significance should not be underestimated. This is especially true considering the fact that the Australian regulator has not ended the current monetary policy tightening cycle but has only paused the process.
Australian Jobs Report
According to the data published today, the unemployment rate in March remained at 3.5%—almost a 50-year low, although most experts predicted a slight increase in the indicator (to 3.6%). Employment, meanwhile, rose by 53,000 last month, which significantly exceeded forecast estimates: analysts expected to see a 20,000 increase in the number of employed. It is important to focus on the structure of this component.
The positive dynamics of the increase in employment in March were solely due to the growth of full-time employment, which jumped by 72,000. On the other hand, part-time employment showed a negative trend, decreasing by 19,000. This trend may positively affect the dynamics of wage growth, as full-time positions usually offer a higher level of wages and a higher level of social security.
Recall that at the beginning of April, Reserve Bank Governor Philip Lowe, hinted that the regulator is ready to continue raising interest rates. The RBA emphasized that it has only paused the process of raising the rate, not completed the current cycle of monetary policy tightening. In a separate statement, the central bank noted that "some tightening of monetary policy" may be needed in the future, as the Board still intends to return inflation to the target level "and will do everything necessary to achieve this goal."
What does today's release say?
By itself, today's report did not change anything. The Reserve Bank will maintain a wait-and-see attitude if inflation shows a downward trend. Recall that the January and February inflation releases were in the "red zone," reflecting the slowdown in inflation in Australia.
It is worth recalling that following the last RBA meeting, Lowe noted that central bank members are still concerned about the possibility of a wage-price spiral in the country. The head of the central bank quoted the accompanying statement's wording that the Board of Directors remains vigilant about the risk of a "wage-price" spiral. Lowe also stated that the regulator will pay close attention to the dynamics of labor costs and the behavior of firms and enterprises in setting prices in the coming months.
Such rhetoric suggests that the RBA may resort to several rounds of rate hikes this year if inflation in the country starts to pick up again. In this context, the Australian jobs report play a significant role by expanding, so to speak, the field for maneuver.
Conclusions
The AUD/USD pair is showing an upward trend for two main reasons: the U.S. dollar is under pressure after yesterday's inflation data (the overall consumer price index fell to 5.0% in March after the February drop to 6.0%), while the Aussie strengthened its positions due to the Australian jobs report, which were in the green zone. Additionally, AUD/USD buyers received background support on news that Australia reached an agreement with China to settle a barley dispute. According to the head of the Australian Foreign Ministry, Beijing agreed to review tariffs imposed on Australian barley, indicating that the corresponding trade dispute (which has been ongoing since 2020) is settled.
Thus, the AUD/USD pair retains upside potential – not only due to the weakening greenback, but also due to the strengthening of the Aussie.
From a technical point of view, the pair on the daily chart, is located between the middle and upper lines of the Bollinger Bands indicator, under the Kumo cloud, but above the Kijun-sen and Tenkan-sen lines. Given this location, as well as the strength of the upward trend, we can assume that the aussie will test the nearest resistance level of 0.6770 in the medium term: at this price point, the lower boundary of the Kumo cloud on the D1 timeframe coincides with the upper line of the Bollinger Bands indicator.
