AUD/USD, ASX 200: Struggling for traction following latest corrective bounce

• Australia’s jobs report was solid for October
• Employment surged by 55,000 while unemployment rose to 3.7% thanks to higher labour force participation
• AUD/USD and ASX 200 remain driven by offshore factors with the domestic picture for the RBA relatively unchanged

Australian employment growth continued to motor in September, keeping alive the prospect of a further interest rate hike from the Reserve Bank of Australia early in the new year.

The Australian Bureau of Statistics reported employment grew by 55,000 over the month, more than doubling the 24,000 median economist forecast. The part-time workforce grew by 38,000 while full-time employment rose by a smaller 17,000, hinting the strength in hiring may have been at least partially driven by the staffing required to conduct the Voice referendum.

Unemployment rose two tenths of a percent to 3.7% despite the jobs beat, boosted by a 0.3% lift in labour force participation to 70%. Underutilisation, which captures unemployed and underemployed workers in the labour force, rose by a smaller tenth of a percent to 10%, still well below the levels seen prior to the pandemic. Combined with slowing growth in total hours worked, it suggests Australia’s labour market is slowly starting to loosen from extremely tight levels.

For the RBA, the solid report card really doesn’t change the outlook for monetary policy settings with it not strong enough to warrant a follow-up hike in December but not weak enough to snuff out the risk of another lift in the cash rate to 4.6% in February. That risk is currently deemed a line-ball call by markets.

The reaction in the AUD/USD and ASX 200 reflects the neither here nor there message from the data, continuing to be driven by offshore factors.

AUD/USD continues to battle with sellers above .6500

Despite an improved risk environment, softer US dollar, thawing geopolitical tensions with China and the RBA being one of the last remaining developed market central banks who are still signalling the potential for further rate hikes, AUD/USD continues to struggle above .6500. The pair likely needs to break convincingly above .6520 to bring out further buyers, otherwise a pullback back towards .6400-6440 may be on the cards.

ASX 200 looking fatigued following abrupt risk rally

Much like other major equity indices, the ASX 200 looks fatigued after its recent rally, being categorically rejected on the test of resistance at 7145 earlier this week. Sitting just above support at 7080, a break below this level would open up a move towards 7000. RSI is also starting to wane, warning on a potential near-term shift in momentum to the downside.

-- Written by David Scutt

Follow David on Twitter @scutty