Forex News: Aussie Sold on Softening Labor Market

DailyFX

THE TAKEAWAY: Australian labor market weakened in December > Diminished growth prospects may prompt policy officials to reduce interest rates > Aussie traded lower

The Australian dollar continued the move lower versus the Canadian dollar as the Aussie unemployment rate increased to 5.4 percent in December, up from 5.3 percent in November. At 0:30 GMT today the newswires reported that the Australian economy shed 13,800 full time staffers and added 8,300 part time workers. On net, 5,500 workers found themselves without pay in December.

A weakening labor market may prompt central bank policy officials to reduce the cost of borrowing in an attempt spur economic growth and bolster jobs growth. Forex traders likely sold the higher-yielding currency as the prospect of reduced interest rates in the future may diminish the attractiveness for earning interest on carry-trade positions.

The AUD/CAD currency pair began to trade lower prior to the employment release as price appeared to be near a potential level of resistance on a daily chart around the 1.0440 area. Potential support could be established around the 1.0268 area if bearish pressure continues to build and price breaks lower.

AUD/CAD, 15 Minute Chart

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AUD/CAD, Daily Chart

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