Bumper AU jobs data and China rate cut ignite AUDNZD

As noted in our preview yesterday, the survey reference period was November 28th to December 11th, pre the surge in Omicron cases in late December. As such, the impact of Omicron will not be seen until the January and February jobs data and result in a renewed, albeit temporary, hit to employment.

The recovery in the labour market sees the level of employment now 0.5% above pre-Delta levels. At this pace the unemployment rate is set to fall below 4% in the coming months and almost certainly spells the end to the RBA’s QE program in February.

During the second half of 2021, the Reserve Bank of Australia noted on many occasions that a tighter labour market was required to lift wages growth as a prerequisite to raising interest rates.

Based on today's data, wages growth should accelerate towards 3% y/y by the second half of 2022, putting the start of an RBA tightening cycle firmly on the calendar for early in the second half of 2022.

The preferred way to play today's robust jobs data is via long AUDNZD, which takes out of the equation some of the event risk of next week's Federal Reserve meeting.

Additionally, it incorporates the benefits of Chinese policymakers taking further steps to meet their growth targets by cutting the one-year loan prime rate by 10 basis points to 3.7% and the five-year rate by 5 basis points to 4.6%. It is worth noting that when Chinese authorities set and reaffirm growth targets, they rarely miss them.

Technically, the break above resistance/congestion at 1.0650 allows the rally to extend towards the top of the six-month trend channel from the 1.1043 August high at 1.0820.

To take advantage of this view, use dips back towards 1.0665/45 to open longs in AUDNZD, looking to take profit 1.0800/20. Stops should be placed below the 2022 range lows at 1.0565.

Source Tradingview. The figures stated areas of January 20th, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

Contracts for Difference (CFDs) are not available to US residents.

FOREX.com is a trading name of GAIN Capital - FOREX.com Canada Limited, 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA is a member of the Canadian Investment Regulatory Organization and Member of the Canadian Investor Protection Fund. GAIN Capital – FOREX.com Canada Limited is a wholly-owned subsidiary of Stonex Group Inc.

Complaints are taken very seriously at FOREX.com. You can view our complaints procedure here.

Know your advisor