US TSYS: Light Twist Flattening As Latest US-Iran Developments Mulled

• The FOMC will probably be relieved that it has another month to assess the fallout from the Middle East war without being unduly concerned about an imminent collapse in the labor market.
• That lack of immediate concern has been further bolstered by higher frequency indicators with initial jobless claims holding at very low levels and weekly ADP employment accelerating to a monthly equivalent that would be its strongest since Jan 2024.
• The Committee will continue to see a low-hiring, low-firing labor market that is indicative of being roughly in balance, with the underlying data meaning the debate is set to continue over whether it is weakness in labor supply or demand that has the upper hand.

For more detail, see our latest Employment Insight - “Strong Bounce Alleviates Concerns” (link).

Data in the five and a half weeks since the last FOMC meeting have on balance shown initial resilience to the energy price shock seen in March, especially in the labor market, although surveys warn higher spillover to non-energy prices could be in the pipeline. 

Labor Market: Resilient, And If Anything, Improving

• The March BLS employment report was undoubtedly strong across its main readings and will have allayed concerns that February's pullback in payrolls portended a renewed leg of weakness in the labor market. Monthly nonfarm payrolls growth of 178k was the highest since December 2024, easily beating the 70k MNI dealer median, with private payrolls up 186k vs the 75k expected.
• In addition, the dip in the unemployment rate to a nine-month low 4.26% (consensus 4.4%, 4.44% prior) in the household survey suggested that the headline payroll gains were no fluke.
• But while this was a better-than-expected report, it came in the context of significant volatility in month-to-month figures, including sizeable revisions to February's reading (-113k vs -92k, offset by a +34k upside revision to January). And the rebound, while impressively broad across sectors, was still heavily driven by healthcare employment and other sectors that appeared impacted by one-off factors in February.
• Stepping back, the three-month change in payrolls has firmed to +68k (an 11-month high), with the 6-month average gains rising to 15k from -2k in Feb for the highest since in 6 months. So, an improvement in trends, but not enough to suggest that employment gains are doing anything but treading water. Payrolls have grown by just 0.2% Y/Y.
• Indeed, while the unemployment rate drop was suggestive of reduced labor market slack, it was flattered by a decline in the size in the labor force as well as falls in the participation and employment-to-population ratios. The weakest response rate in survey history is also a concern. Additionally, growth in average hourly wages continued to decline to fresh post-2021 lows on a Y/Y basis and are far off post-pandemic highs. 

• RES 4: 0.7305 Top of a bulel channel drawn from the Apr 9 ‘25 low 
• RES 3: 0.7277 2.0% Upper Bollinger Band
• RES 2: 0.7222 High Apr 17 and the bull trigger
• RES 1: 0.7200 High Apr 27
• PRICE: 0.7193 @ 17:06 BST Apr 27
• SUP 1: 0.7092 20-day EMA 
• SUP 2: 0.7030 50-day EMA 
• SUP 3: 0.6899 Low Apr 7 
• SUP 4: 0.6833 Low Mar 30 and a key support 

A bull cycle in AUDUSD remains in play and the pair is holding on to the bulk of its recent gains. The setup in the 20- and 50-day EMAs is positive, and continues to highlight a dominant uptrend. 0.7103, the 76.4% retracement of the Mar 11 - 30 bear leg, has been cleared, as well as the bull trigger at 0.7187, the Mar 11 high. First key support to watch lies at 0.7030, the 50-day EMA. A clear break of it would undermine the bull theme.