Australian employment printed in line with expectations but the underlying data was weaker than the headline reading keeping downside pressure on the unit. The Aussie initially spiked to 1.0340 on news that employment rose by 10.4K versus 5.8K eyed but then quickly dropped off its highs as traders looked underneath the data.

Australian job picture did improve expanding after last month’s contraction of -3.8K. The unemployment rate also remained steady at 5.4% versus 5.5% forecast while labor participation declined a bit to 65% from 65.1%. However all of the gains came from part time rather than full time jobs. Full time jobs declined by -9.8K suggesting that labor demand Down Under is slowing which could have negative implications for the overall economy in H1 of this year.

Currency markets remain wary of the Aussie and the prospect of further rate cuts from the RBA as the year develops. The unit is now under attack on two fronts – it is losing its luster as repository of safe haven funds as the situation in Europe improves and it also becoming less attractive on interest basis as rate differentials continue to contrast.

The Aussie remains mired near the 1.0300 level and a break below 1.0290 could open the path towards a test of 1.0250 while 1.0350 caps any upside potential for now.

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