The Aussie jumps on solid employment figures

The Aussie jumped during the Asian session today as the employment data outperformed expectations and showed that there is still life in the Australia Employment market. Characteristically the employment figure was 39.9k, better than 14.0k expected, while at the same time the unemployment rate ticked down to 5.2. The release seems to have lowered also any market expectations for RBA to proceed with a rate cut in the February meeting. It should be noted that the bank had argued in the past that unemployment has to drop to 4.5% in order for a lift in wage growth to appear. The bank’s last meeting minutes released on Tuesday’s Asian session, once again underscored the weight that the bank placed on the employment figures. Analysts tend to note though that the figures may prove to be no game changer for the RBA, as most of the gains seem to relate to part timers. We could see the Aussie getting some further support from the release, yet as the market digests it, we could see pressure exercised on the AUD later on. AUD/USD rose during the Asian session today, breaking the 0.6875 (S1) resistance line, now turned to support. We could see the pair correcting lower after today’s sudden jump, aiming for prior levels. Should the pair come under the selling interest of the market, we could see it breaking the 0.6875 (S1) support line and aim for the 0.6850 (S2) support level. On the flip side, should the pair find fresh buying orders along its path, we could see it aiming if not breaking the 0.6905 (R1) resistance line.

…while the pound prepares for BoE’s interest rate decision…

Today during the late European session (12:00, GMT), we get BoE’s interest rate decision and the bank is widely expected to remain on hold at +0.75%. Currently GBP OIS imply a probability of 96.55% for such a scenario, in which case the market’s attention could turn to the accompanying statement. The recent euphoria about Brexit after the UK elections seems to have been fully overturned and uncertainty once again dominates the pound. Also the recent inflation rates may have outperformed market expectations, yet are below the bank’s inflation target of +2.00%, albeit it should be mentioned that the employment market seems to remain tight. It should be noted that economic activity seems to be contracting in all three sectors of the economy and the market seems to be pricing in a rate cut for 2020. We could see the bank maintaining a dovish tone, as it did in the last decision, which could weaken the pound further. Cable maintained a sideways motion yesterday, between the 1.3170 (R1) resistance line and the 1.3015 (S1) support line. The pair’s price action seems to be threatening the downward trendline incepted since the 16th of December and should there be a clear break of the prementioned trendline, we would switch our bearish outlook for the pair. Should the bears maintain control over cable’s direction, we could see it breaking the 1.3015 (S1) support line and aim for the 1.2820 (S2) support level. Should on the other hand the bulls take over, we could se the pair breaking the 1.3170 (R1) resistance line aiming for the 1.3340 (R2) resistance level.

Other economic highlights today and early tomorrow

Today, during the European session we get one of the most interesting central bank interest rate decisions, as Sweden’s Riksbank, seems set to hike rates by 25 basis points and say goodbye to the negative interest rate territory, reaching 0.0%. Also during the European session we get from Norway, Norgesbank’s interest rate decision which is expected to take a break and remain on hold at +1.50%. From the UK, besides BoE’s interest rate decision, we get the retail sales growth rate for November. In the American session, we get from Canada the wholesale trade growth rate for October and from the US the initial jobless claims figure, the Philly Fed Business index for December and the existing home sales figure for November. During tomorrow’s Asian session, we get Japan’s inflation rate for November.

AUD/USD 4 Hour