Aussie tumbles as pressure builds on the RBA to cut interest rates
The Australian Dollar tumbled to its weakest level against the greenback since December 2018 after the Australian unemployment rate increased for a second consecutive month. The Australian Dollar is currently trading below the 0.6900 level against the US Dollar as traders and investors continue to bet that the Reserve Bank of Australian will soon cut its benchmark interest rate by 0.25 percent.
The official Australian unemployment rate increased to 5.2 percent, marking a sharp increase in the nation’s unemployment rate last month, which was at 4.9 percent in February. The monthly employment report also showed that a net 6,300 full-time jobs were lost last month, despite 28,000 new jobs being created last month.
Traders and investors believe the RBA will be forced to cut interest rates at the next policy meeting after the recent Reserve Bank of Australia policy statement recently said that rise in the Australian unemployment rate would warrant a rate cut from the central bank. With still inflation weakening and the unemployment rate rising it now seems increasingly likely that the RBA will be forced to act next month.
The Australian monthly jobs report highlighted that the rise in the unemployment rate was due to more workers looking for jobs and an ongoing tightening in credit conditions amongst businesses. Fewer jobs advertisements and a lack of job availability for unskilled workers is also hurting the jobs market. Wage growth inside Australia has also stagnated, with the construction sector suffering from depressed wage inflation.
Foreign exchange markets moving into risk-off mode this week has also hurt riskier currencies, with the Australian Dollar and the New Zealand Dollar both suffering from the recent increase in trade tariffs from both the United States and China. The move lower in antipodean currencies is likely to continue as the Sino-U.S trade war moves into a new bearish phase.
AUD/USD Daily Mountain Chart | Source: ActivTrader
The daily time frame chart is showing that a bearish head and shoulders pattern is now in play, with the AUD/USD pair trading below the neckline of the pattern. The 0.6830 and 0.6770 levels now offer the strongest form of support if the decline continues, while the 0.6900 and 0.6930 levels key near-term resistance on any technical corrections higher.
Written by Nathan Batchelor, External Analyst, ActivTrades
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