The Australian currency (AUD) gained the most today among the world's major currencies against the US dollar this morning. It seems that this is the effect of data from the Australian labor market released tonight, which reduced the probability of further easing of monetary policy by the RBA.
Unemployment rate data released tonight showed that in September unemployment in Australia fell to 5.2 percent against the market consensus at 5.3 percent. Furthermore, the number of unemployed fell by 8,100 and employment increased by 14,700. The number of full-time job seekers decreased by 4,600 to 44,8500, and the number of part-time job seekers decreased by 3,600 to 22,100.
As a consequence of better data, the Australian dollar rose against all major currencies, as the market pricing of interest rate cuts by the Reserve Bank of Australia fell to 20 percent next month from 40 percent before the data from the labor market. Declining labor supply and return of the unemployment rate to 5.2 percent may be positive information for RBA and investors. Although easing in Australia cannot be ruled out yet, however, it is worth noting that in the US the chances of cutting are still very high and in Australia, they have decreased. This, in turn, may support the AUD/USD exchange rate.
AUD/USD non-commercial net long positions and AUD/USD rate. Source: tradingster.com
It is also worth mentioning that despite the further AUD decline in 2019, speculative market-oriented investors did not increase their involvement in positions that may benefit from a further decline in the exchange rate. This may mean that at current prices, betting on a continuation of AUD/USD decreases may not be very profitable.
This type of divergence between price and investor positioning often might be translated into changing trends. Of course, we are talking about long-term trends, so changes also do not occur overnight, but it is worth paying attention to this market and the possible exhaustion of the downward trend.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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