Originally published by AxiTrader
The Australian dollar has had a bit of volatility over the past 24 hours as discussions about bond spreads and yesterday's solid, but not spectacular, jobs data in Australia seems to have acted as a handbrake on the AUD/USD relative to the move of the yen, and other pairs.
At 0.7941 the Aussie is still a quarter of a percent higher this morning - so it's not exactly a poor performance.
The discussion on spreads is interesting. It seems to come and go and yesterday was one of those days it came.
As I've written before and earlier today in Market's Morning, regular readers of this note and my daily Aussie dollar piece know that I’ve been banging on about the bond spread for ages now. But the talking point is that while the 2’s spread has been negative for a while the 10’s went negative this week for the first time in about 18 years. That reduces the attractiveness of the Aussie dollar to global investors. Except of course when the US dollar is itself the ugly sibling. So even though the Aussie is neither Prince Charming nor Cinderella it is at least getting a few dances at the ball given the US dollar is so out of favour. That’s something the following chart shows – the AUD/USD has been able to shake off the closure of this spread recently. After all, every quarter since President Trump took office the US dollar has fallen.
The key here is that the Aussie, no currency or exchange rate, is a single factor model reliant on just one input. The US dollar's fall, the global backdrop, commodity prices, and risk appetite are all important as well for the AUD/USD - and crosses.
As for employment, I would characterise yesterday's January employment data as solild. Solid because the continued increase in the participation rate along with the increase in jobs together with the employment to population ratio holding firm at 62% - after a solid recovery in the past couple of years is a good sign. A sign that even though the unemployment rate seems sticky in this 5.5% region a broader spectrum of the Australian working age population is enjoying the fruits of the jobs boom. That can only be good for spending and growth.
Turning to the charts now and the Aussie is sitting right on my slow moving average at the moment after having traded up to a high of 0.7666 last night. It then traded back close to 79 cents before moving back to the 0.7945 region where it now sits.
0.7990/93 is the level to watch topside. A break would open the way back above 81 cents. Support at 0.7890/0.7900 looks solid and should hold.. If it breaks Aussie could run quickly.
Have a great day's trading.