Forex Market: AUD/USD extends gains as Australian economy creates three times as many jobs as anticipated in July

AUD/USD extended gains from the prior trading day on Thursday after better-than-anticipated employment data from Australia indicated economy remained resilient amid ongoing COVID-19 outbreak in Melbourne.

The latest report by the Australian Bureau of Statistics showed economy created 114,700 jobs in July, or almost three times more than what analysts on average had expected. The number of people in full-time employment rose by 43,500 in July, while the number of part-time employed persons rose by 71,200.

However, the nation’s seasonally adjusted rate of unemployment went up to 7.5% in July from 7.4% in June. July’s jobless rate has been the highest since November 1998. The number of unemployed persons rose by 15,700 to 1,009,400 in July as a result of the pandemic.

“While today’s data looks better than expected, timing is everything,” Sarah Hunter, chief economist for BIS Oxford Economics, said.

“Restrictions have tightened and conditions worsened since then, with payrolls confirming that employment in Victoria is now falling. Employment is likely to slip back in August.”

Projections by the Reserve Bank of Australia point to a rise in the nation’s unemployment rate to 10% by the end of 2020 before dropping to 7% by mid-2022.

Meanwhile, the US Dollar weakened against a basket of six major peers, as US bond yields fell amid continuing political impasse over the next fiscal stimulus package. Some analysts, however, believe this is a temporary setback because an agreement on stimulus will eventually be reached to allow US economy to recover.

“The dollar needs positive news on stimulus to rise further, but I’m sure we’ll get there, because these politicians can’t go back to their constituencies empty handed,” Masafumi Yamamoto, chief currency strategist at Mizuho Securities, said.

“Once this happens, gains in dollar/yen could be a catalyst for dollar gains against other currencies,” Yamamoto added.

As of 7:02 GMT on Thursday AUD/USD was inching up 0.09% to trade at 0.7167, while moving within a daily range of 0.7156-0.7188. The major pair advanced 3.48% in July, which marked its fourth consecutive month of gains. The pair has edged up 0.15% so far this week.

In terms of economic calendar, at 12:30 GMT today the US Labor Department will report on jobless claims. The number of people in the country, who filed for unemployment assistance for the first time during the business week ended August 7th, probably eased to 1,120,000, according to market expectations, from 1,186,000 in the preceding week. The latter has been the lowest number of claims since the beginning of the COVID-19 pandemic, while data pointed to the sharpest weekly decrease in jobless benefits applications in nearly two months.

Bond Yield Spread

The spread between 2-year Australian and 2-year US bond yields, which reflects the flow of funds in a short term, equaled 12.0 basis points (0.120%) as of 6:15 GMT on Thursday, up from 11.9 basis points on August 12th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.7149
R1 – 0.7188
R2 – 0.7215
R3 – 0.7255
R4 – 0.7294

S1 – 0.7122
S2 – 0.7082
S3 – 0.7055
S4 – 0.7028