Australian Employment and Economy Roaring Ahead

Stunning Australian jobs data adds fundamental luster to the Australian dollar’s strongly bullish technical outperformance, putting the AUD/USD currency pair back in focus.


Strong Australian Employment Data Release

A few hours ago, the Australian Bureau of Statistics released fresh monthly data for February 2021 on the number of newly employed people over the month as well as the percentage of the workforce currently unemployed.

The data was far more positive than had generally been expected by analysts. A net total of 88,700 new jobs were added in February while only 30,500 had been expected. Impressively, almost all this gain from full-time jobs, while the part-time total suffered a net decline over the month, indicative of economic recovery and a continuing shift back into more full-time work. The headline unemployment rate fell from 6.3% of the workforce to 5.8%, while the expectation had been that the rate would remain unchanged at 6.3%.

The Australian dollar was relatively unmoved by this news, as the U.S. dollar was still clearly the main driver of the Forex market as it had only been a few hours since yesterday’s FOMC forecast and rate release which was having a dominant impact on prices. Yet clearly, the Australian economy seem to be performing more strongly than had been expected. Perhaps crucially, the net increase in jobs puts Australia’s employment rate back to where it was before the global coronavirus crisis / economic shot began to hit in March 2020, which is psychologically significant as a milestone.

What does this improving Australian economic environment mean for the Australian dollar?

Future of the Australian Dollar in 2021

It seems clear that Australia is booming, at least in relative terms. Australia has been much less adversely affected by the global coronavirus pandemic than any other advanced economy except New Zealand, and this is arguably reflected by the fact that while most major currencies have gained quite strongly against the U.S. dollar since the immediate aftermath of the coronavirus shock in March 2020, no major currency has gained as much as the Australian and New Zealand dollars.

Despite this seemingly bullish picture for the Aussie, many analysts expect its relative outperformance to come to an end, due partly to the fact that the government’s JobKeeper subsidy ends next month which will end the artificial support enjoyed by the post-coronavirus economy, and party to the fact that there is such strong market focus on the U.S. dollar that the greenback will inevitably be the prime driver of the AUD/USD exchange rate.

Despite this, other analysts point to the rising yields on long-term Australian government bonds as evidence that no matter how much the RBA tries to avoid talking up the strength of the Aussie, the market will not be hoodwinked, and capital will continue to flow into Australia.

Bottom Line: What Does this Mean for Forex Traders?

Simply put, if there is a long-term trend against the U.S. dollar, this is reliable momentum and the question then becomes which currency or currencies to focus on being long of against the greenback. As the Australian dollar is showing both long- and short-term bullish momentum, which is relatively stronger than any other major currency, traders will be wise to strongly consider looking for long trades in the AUD/USD currency pair, as such longs are supported by both fundamental and technical analysis. The key thing to watch for is whether the USDX (U.S. Dollar Index) is higher over both 3-month and 6-month lookback periods.

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