AUD/NZD bulls take back control on Aussie jobs, but . . . is the data as rosy as the price movement thinks it is?

• AUD/NZD has rallied on the release of the Aussie jobs data with the unemployment rate moving more in lines with what the RBA would like to see down at 5% and below the 5.3% where it had been accumulating for quite some time. However, the participation rate was a miss and lower than the expected 65.7% and the prior 65.7%, arriving at 65.4%.
• AUD/USD rallied to a high of 0.7130 on the news that the unemployment rate had fallen. 

RBA Deputy Governor Debelle's speech at the Citi Conference on The State of the Labour Market yesterday was a reminder to markets that there are concerns in the RBA over the nation's low wage growth - This is despite strong employment and decent participation rates. It was then when he hinted that the unemployment rate might have to fall below 5% (current: 5.3%) to stabilize inflation. 

However, today's rate only fell to 5% - So there could be a change of tides here when the markets digest this, especially if this is seen as just transitory.  

The Aussie is by no stretch of the imagination out of the woods yet, not with the amount of risks associated to higher US yields, trade wars, EM-FX, the Yuan as high as it is with little signs of a change in its southerly trajectory in immediate sight - currently at 6.9300 and lowest levels since 11th October.

Indeed, while the unemployment change is great news - there is still plenty in there that needs a second look, and not all is rosy as this price movement says it is. 

Aussie jobs outcomes:

• Employment Change: +5.6K, came in at a miss vs the expected +15.0K, prior +44.0K … prior revised to +44.6K
• Unemployment Rate: 5.0% vs expected 5.3%, vs prior 5.3%.
• Full-Time Employment Change: +20.3K, prior was +33.7K, revised to +35.2K.
• Part Time Employment Change: -14.7K, prior was +10.2K, revised to +9.5K.
• Participation Rate: 65.4%, vs expected 65.7%, prior 65.7%.

Meanwhile, a better risk environment of late has been contributing to the Kiwi's rise that was otherwise already well supported on domestic factors with the GDP and CPI surprise beats. Firstly, in late Sep.,the New Zealand April to June economic growth came in at a beat: +1.0% q/q  expected 0.8% q/q, prior 0.5%  2.8% y/y expected 2.5% y/y, prior 2.6%, revised from 2.7%. Then, we had the recent NZ CPI data that will have diminished ideas of a rate cut shortly from the RBNZ. The data arrived at 0.9% q/q vs. expected 0.7% and much better than prior 0.4% q/q - (1.9 % y/y - higher than expected 1.7% y/y, prior 1.5%). However, it depends as to whether the RBNZ will interpret this strength in Kiwi data as just transitory or not. 

AUD/NZD levels

Before the pre-data and post data spike, the cross had broken through the 1.0851/32 support zone which brings the 200-week moving average at 1.0757 to the fore, according to analysts at Commerzbank:

"Around it we would expect the currency pair to at least short-term stabilise. Were this not to be the case, the February, May and June lows at 1.0657/52 would be back in the picture but should hold. Immediate downside pressure will be maintained while the currency pair remains below the 55 day moving average and the current October high at 1.0945/95 as well as the September high at 1.1022. Above the latter sits the 1.1058 August 21 high. It would have to be exceeded on a daily chart closing basis for the August high at 1.1180 to be back in the picture. This is not our favoured view and instead a continued slide should unfold."