What the fallout from “Super Thursday” means for the AUDUSD

After the highest US inflation print since 2008 failed to move currency markets last week, the focus moved to today, bringing with it an FOMC meeting, a speech by RBA Governor Philip Lowe as well as Australian jobs data.

Trader 1

My colleague Matt Weller has provided an excellent review of this morning’s FOMC meeting here. Hence this note will provide a review of RBA Governor Lowe's speech as well as the Australian jobs data for May and what it all means for the AUDUSD.

Learn more about trading FX

Before I do, a point worth noting is that the initial post FOMC reaction in FX has been promptly reversed in recent times and the last time an initial post FOMC move extended was in June 2019. Perhaps wary of this, traders were initially reluctant to chase the AUDUSD lower after the re-open this morning.

However, after RBA Governor Lowe's speech concluded noting “For inflation to be sustainably in the 2–3 per cent range, wage increases will need to be materially higher than they have been recently”, the AUDUSD took its first look below .7600c since mid-April.

A move that was soon to be reversed as a huge 115k rise in employment sent the unemployment rate down to its pre-pandemic rate of 5.1%. This despite the participation rate rising to 66.2%, just below its all-time high.

The unemployment rate is now within eyesight of Treasury’s estimate range for NAIRU (full employment). The question now is what would prompt the RBA to bring forward rate hike forecasts as the Federal Reserve did this morning?

Goldman Sachs suggest that should the unemployment rate fall to 4.25% by the end of 2021, it would be enough to generate the wages growth and inflation to warrant a rate hike by mid-2023.

With this in mind, providing the AUDUSD continues to hold above a band of medium-term support .7550/.7530 area coming from the 200-day ma and the April .7532 low, the risks for the AUDUSD are to the upside.

Aware that should the AUDUSD break and close below the aforementioned support zone, then allow the decline to deepen towards .7400c.

What the fallout from Super Thursday means for the AUDUSD

Source Tradingview. The figures stated areas of the 17th of June 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

More from Forex

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.