AUD/USD bears in control, seeking a breakout below 0.64 the figure
- USD is breaking up through the 100 handle to a fresh daily high of 100.56.
- AUD/USD is topping at a 61.8% Fibonacci retracement in the mid-0.65s.
AUD/USD has been under pressure since the end of the April and is heading towards the May 4th lows down at 0.6372. In today's range, we have seen a low of 0.6403 from a high of 0.6468.
We are entering a deflationary environment which is bullish for the USD in the near time and the markets sense a squeeze in the short-dollar market position on the cards. Commodities have been in freefall in 2020, taking out the entire Chinese commodity boom and we also have a trade war underway between China and Australia.
The Australian Trade Minister, Simon Birmingham, is seeking talks with counterpart Zhong Shan to try and settle down tensions following Beijing's move earlier this week to block imports of Australian barley and beef. Australia’s barley shipments to China are worth about US$1 billion a year and the beef ban will affect about one-third of the country’s exports to China, with an annual value of US$800 million.
Aussie jobs outcome
Meanwhile, the Aussie jobs market is in tatters as the economy takes a big lockdown hit in the measures to protect against the spread of COVID-19.
- Employment: -594.3k, a larger fall than our expectations (-450k) and the market (-550k).
- Unemployment: rose to 6.2% from 5.2% less than forecast (Westpac & market 8.3%) and much less than you would expect given the magnitude of the fall in employment.
- Participation rate: collapsed to to flat at 63.5% from 66.0%.
- Underemployment: surged to 13.7% from 8.8% and provides a better feel for the pain the economy is in than the unemployment rate.
- Youth unemployment: lifted to 13.8% from 11.5%.
As can be seen, the participation rate led to a less concerning unemployment number which markets have picked up on and got out of Aussie dollars. "A better measure of the impact of the COVID shutdowns is illustrated by the 9.4% fall in total hours worked in the month and the 4.9ppt surge in underemployment to 13.7%," analysts at Westpac explained.
AUD/USD levels
Meanwhile, the sentiment has turned this week which has nullified the continuation trade projection towards 0.6700. Eyes are now on a break below 0.64 the figure.