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Abstract: The AUDUSD remained above 0.6400 during the day, which was a subconscious reaction to Australia's strong labor market report. The report showed that the number of employed people increased by 64,900 in August. As the market is still examining the AUD bears' path, the upside of the AUDUSD seems elusive.

Fundamentals

The AUDUSD strengthened after Australia's employment report in August was stronger than expected.

According to the data released by the Australian Bureau of Statistics, the net employment in August increased by 64,900 compared with that in July, which was higher than the market forecast of 25,000. This growth was almost entirely driven by the increase of 62,100 part-time jobs. The unemployment rate is stable at 3.7%, which is in line with market expectations. This statistic has been hovering between 3.48-3.78% since last June. The employment participation rate soared to 67.0%, the highest level since records began in 2013.

The strong job market data shows that the demand in the labor market has not been relaxed despite the interest rate being at a ten-year high. In addition, working hours have also been reduced, which has tarnished the impressive employment growth data.

We believe that with the weakening of economic activities, the labor market will eventually cool down, but today's data can neither confirm nor deny whether this process has really begun. Because enterprises are still adding employees, job vacancies are still high, and employment growth may remain stable in the coming months.

Our views on the Reserve Bank of Australia (RBA) have not changed because of these data. We expect the cash interest rate to remain at 4.1% or "higher" for a long time. Because inflation remains high, the labor market is still tense. The RBA recently said that it will closely evaluate inflation and employment data when determining the interest rate trend, and the data released today may allow the RBA to raise interest rates at least once before the end of this year.

Even after the release of strong employment data, the market is expected to tighten again by only 9 basis points, which means that there is still plenty of room for hawkish repricing and the rise of the AUD. Despite this, the economic situation in the U.S. is still more important to the AUDUSD. We expect that the AUDUSD will be limited to below 0.6500 for the rest of September because the USD is still supported after the CPI is released in August.

Technical Analysis

Following the formation of a double-top pattern in mid-July, the AUDUSD fell sharply, and it hit a low for several months in a row. Although the price seems to have "successfully" stood at a 10-month low and recovered some of the decline, the road to recovery seems to be particularly tortuous. We believe that the bearish forces have not completely withdrawn, at least for now.

It is true that if the negative pressure weakens in the short term, the bulls may overcome the support level of 0.6454 in May, which is now an upward resistance. After overcoming this obstacle, bulls may attack the recent resistance range of 0.6480, and further rise will test 0.6521. Any subsequent rise should stop here, otherwise, it may trigger a bear reversal.

Alternatively, the bearish momentum may lead the bears to regain control of the situation with the strong performance of the U.S. economy (bullish dollar). In that case, the bears may retest the 10-month low of 0.6356. Falling below this range may trigger the price to fall to the bottom of 0.6271 in November 2022.

Overall, the AUDUSD appears to have gained a foothold, but the bear alert has not been fully lifted until it is clear that it has regained lost ground. It is recommended to buy low and sell high.

Trading Recommendations

Trading direction: Short

Entry price: 0.6480

Target price: 0.6247

Stop loss: 0.6617

Deadline: 2023-09-28 23:55:00

Support: 0.6412, 0.6380, 0.6357

Resistance: 0.6450, 0.6480, 0.6521