Buying AUDUSD in case of high employment rate in Australia

Today the Reserve Bank of Australia (RBA) cut its interest rates from 4.35% to 4.10% within expectations. The market was mainly focused on the RBA’s comments on further easing prospects. 

According to the Reserve Bank of Australia quarterly monetary policy statement, which was released alongside the interest rate decision, the financial conditions remain restrictive, and the interest rate of 4.35% is above estimates of the neutral rate.

The Australian central bank expects the core inflation to decline faster than previously anticipated. Therefore, the bank lowered its growth forecast for the economy, although the tight labor market is likely to create some lasting price pressures.

Core inflation, the trimmed mean closely watched by the Reserve Bank of Australia, is expected to decelerate to 2.7%. The previous forecast anticipated a slowdown to 3.0%.

According to the RBA’s statement, the increase in manufacturing activity will contribute to the tight labor market and provide some upward pressure on inflation. 

The RBA no longer expects further labor market weakening, although it is still considered tight relative to the full-time employment rate. The Bank now expects the unemployment rate, which was 4.0% in December, to rise to only 4.2% by June and remain at that level until mid-2027, compared to the previous unemployment rate forecast of 4.5%.

It can therefore be concluded that the labor market dynamics is the main factor determining the future prospects of the Australian dollar exchange rate. The hot labor market will provide support for AUDUSD. The next report on changes in the employment rate in Australia is to be released on February 20. 

The overall recommendation is to buy the AUDUSD currency pair, provided that the change in the employment rate in Australia is more than 30 thousand people.

Profits should be taken when the quote moves by 800 points. A Stop loss could be set when the quote moves by 500 points.

The volume of the opened position should be set in such a way that the value of a possible loss, fixed with the help of a protective Stop loss order, is no more than 1% of your deposit funds.