- Australian employment up 39k

- Strongest Aussie rally since November

- Fed meeting eyed

Australian employment soared by almost 39, 000 jobs in May, taking forex brokers at top trading institutions by surprise and beating market expectations significantly. The data came as another feather in the bow of the Aussie, which already benefitted from Q1 GDP data which showed a rise of 1.3 percent. 

The jump in jobs completely overshadowed forecasts of a 5k drop, with all the gains arriving in full-time employment which rose 46,100. Part-time jobs meanwhile, saw a drop of 7.2k. "It does seem an extraordinary set of numbers," said Michael Blythe, chief economist at Commonwealth Bank.

"The economy is probably in better shape than we are all willing to admit."

Live forex charts show “insane rally”

“The AUDUSD blew through 9805 and continued all the way to 9930 today”, Jamie Saettele (pictured), Senior Technical Strategist at Daily FX told this site. “This is why one uses stops. There is nothing wrong with a 30 pip loss. The more or less insane rally has brought price right back to where it was in mid-May.”

The AUDUSD rally represents the strongest on live forex charts since November. “More importantly, price is at a level that we’ve cited as important resistance for some time – 9930 (5/22 high).  Resistance extends slightly higher into channel resistance and the 5/16-5/17 highs at 9965.  Support is now 9825/40”, Saettele added.

Whilst the strength of the data is an undeniably strong for the Australian economy, many analysts have also identified that overnight investor appetite for risk is also likely to further gains already made. “Risk assets rallied hard overnight overcoming, albeit temporarily, fears of a Eurozone calamity”, said Mitul Kotecha of Head of Foreign Exchange Strategy at Crédit Agricole CIB. “Given today's jump in risk assets the data will help compound AUD gains in the short term. AUD/USD will face strong resistance around 1.0021.”

Devil in the detail

The data harboured only one negative surprise; an unemployment rate rise to 5.1 percent which has largely been attributed to a rise in the participation rate. More citizens went searching for work in May than in the previous week, sending the rate up to 65.5 percent from 65.2 percent.

Such positivity – emerging the day after such a strong GDP reading – will undoubtedly have been received with open arms by the Reserve Bank of Australia (RBA) who cut rates for the second consecutive month in a bid to support domestic sentiment amid a worsening global scenario. Investors too are likely to have readjusted expectation of further aggressive rate cuts in the Australian economy thanks to the positive data.

Euro zone lawmakers and central bank officials are now under increasing pressure to come up with a credible policy response to support growth which is dwindling by the month and the Fed’s decision this afternoon may either help to quell or fuel further global concern. But amid the global furore, the AUD stands to make further gains from risk-hungry traders. The currency could be set to receive a further boost this afternoon when the Fed announces their decision over injecting further stimulus into the nation’s flagging economy. Last week’s disappointing jobs data from the US has already fuelled investor sentiment over the prospect of further measures, but investor’s will be watching this afternoon at 3pm (BST) for any further indication.

"We expect Bernanke to strike a dovish tone and that will keep alive expectations of more quantitative easing”, Stuart Frost, head of Absolute Returns and Currency at fund manager RWC Partners told Reuters this morning. If the Fed deliver the easing measures which many analysts anticipate, markets are likely to see the decision weigh on the USD, whilst pushing up growth-linked currencies like the Australian and New Zealand dollars and to some extent the euro and the pound.

Sarah Cox, Staff Writer