AUD/JPY: Aussie Supported as Unemployment Unexpectedly Holds Steady

The Australian dollar is foreseen to resume its gains alongside the Japanese yen today as Australian unemployment held steady in January, defying expectations of an increase. Meanwhile, market sentiment is deemed to improve today as Japanese core machinery orders rose for a third straight month in December, suggesting that capital spending intentions have increased.

Strong growth in the number of part-time jobs helped keep Australia’s jobless rate steady last month, offsetting a recent run of weak reports on the Australian economy. The nation’s statistics bureau reported that the unemployment rate remained at 5.4 percent, beating forecasts of a slight rise to 5.5 percent. The economy shed 9,800 full-time positions but added 20,200 part-time jobs, taking the net gain for the month to 10,400. The December jobs figure was also revised to a 3,800 decline, smaller than the 5,500 dip reported a month ago. Economists say the report signified that the labor market is more resilient than many had anticipated as the bettering global economy has helped support the domestic economy.

Although analysts remain convinced that the Reserve Bank of Australia will slash rates again sometime this year, the jobs report is unlikely to provide the central bank urgency to act next month. Last Tuesday, the RBA kept interest rates on hold at 3 percent, citing an improving global economy and subdued inflation. Nevertheless, the board kept the door open for further cuts if the economy disappoints in the coming months. On reduced bets for a rate cut in March, the Aussie is apt to strengthen on relief.

Meanwhile, the Japanese government revealed today that core machinery orders inclined in December for a third consecutive month in a sign global economic recovery and a weaker Yen are inciting companies to increase their capital expenditures. Orders excluding ships and utilities gained 2.8 percent during the month to follow a strong 3.9 percent jump in November, defying forecasts of a decline by 0.7 percent. With the recent weakening of the Yen and an ameliorating outlook for the global economy, firms have likely gained confidence to spend, improving prospects for the Japanese economy. On improved risk sentiment, a long position is advised for the AUD/JPY trades today.

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