AUD/USD nosedives as RBA governor pledges more easing
- The AUD/USD price fell as the market reacted to a statement by RBA governor and Australia's jobs data.
- Governor Philip Lowe said that the bank was likely to offer more easing as the economy recovers.
- Australia's unemployment rate rose to 6.9% as more people lost jobs.
The Australian dollar (AUD/USD) is down by 0.45% as the market reacts to the rising unemployment rate and a statement by Governor Philip Lowe. The pair is trading at 0.7132, which is the lowest it has been since Thursday last week.
Australia unemployment rate rises
The Australian government managed the Covid-19 pandemic well. In total, the country reported more than 27,300 cases and more than 900 deaths. However, in August, a second wave emerged in Victoria and Melbourne, two of the most populous states in the country. To cope with the increase in cases, the government announced new circuit-breaker measures that limited movement.
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In a report today, the Statistics Bureau showed the impacts of these measures to the labour market. The unemployment rate rose from 6.8% to 6.9% as the employment fell to 12.57 million. Also, the underemployment rate rose to 11.4% while the monthly hours worked rose by 9 million people. The employment change decreased by 29.5k in September.
Analysts polled by Reuters were expecting worse. The median estimate for unemployment rate was 7.1% while for employment change was 35,000.
These numbers show that the Australian economy is not out of the woods yet. However, there are two main things playing in its favour. First, the second wave has started to wane. Yesterday, the country confirmed just 14 new cases, which is significantly lower than the peak of 532 in July.
Second, China, Australia’s biggest trading partner is in a recovery mode. The economy expanded by 3.2% in the second quarter and is expected to expand even further in the third quarter. On Tuesday, data from the country showed that exports and imports were continuing to rise. This is a positive thing for the Australian economy.
The AUD/USD price is also reacting to a statement by RBA Governor, Philip Lowe. In the statement, he said that the bank was ready to offer more easing, including rate cut and more quantitative easing. Indeed, analysts polled by Reuters expect that the bank will offer a 15-basis point rate cut to 0.1% in the November 3 meeting. They also expect the bank to expand and extend its quantitative easing program.
AUD/USD technical analysis
The AUD/USD price has dropped sharply in the past few days. It has fallen from the October 9 high of 0.7242 to a low of 0.7122. On the four-hour chart, the price is between 78.6% and 61.8% Fibonacci retracement level. It is also below the 25-day moving average. It also seems to be forming a head and shoulders pattern. As such, I expect that the pair will continue falling as bears aim for the neckline of this pattern at ~0.7000.