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AUD/USD to Face Fresh Monthly Lows on Dismal Employment Report

By , Currency Analyst  and Gregory Marks
12 March 2014 21:00 GMT

Australian Unmployment
  • Australia Employment to Rise for First Time Since November 2013
  • Jobless Rate to Hold at 10-Year High of 6.0%

Trading the News: Australia Employment Change

Australia’s Employment report may help the AUD/USD to close the gap from the beginning of the week as the $1T economy is expected to add 15.0K jobs in February.

What’s Expected:

Time of release: 03/13/2014 0:30 GMT, 20:30 EST

Primary Pair Impact: AUD/USD

Expected: 15.0K

Previous: -3.7K

DailyFX Forecast: -15.0K to 5.0K

Why Is This Event Important:

However, we may see a further deterioration in the labor market as the Reserve Bank of Australia (RBA) sees a risk for higher unemployment in 2014, and another unexpected decline in job growth may put increased pressure on Governor Glenn Stevens to implement additional rate cuts in order to further assist with the rebalancing of the real economy.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Retail Sales (MoM) (JAN)

0.4%

1.2%

Trade Balance (JAN)

100M

1433M

Gross Domestic Product (QoQ) (4Q)

0.7%

0.8%

The widening trade surplus along with the pickup in retail sales may encourage Australian businesses to ramp up on hiring, and a positive development may spark a bullish reaction in the AUD/USD as market participants scale back bets for lower borrowing costs.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

NAB Business Confidence (FEB)

--

7

Company Operating Profits (QoQ) (4Q)

2.0%

1.7%

Private Capital Expenditure (4Q)

-1.3%

-5.2%

However, narrowing profits paired with the sharp decline in business investments may drag on the labor market, and a dismal employment report may trigger a selloff in the Australian dollar as it dampens the outlook for growth and inflation.

How To Trade This Event Risk(Video)

Bullish AUD Trade: Australia Adds 15.0K or Greater Jobs

  • Need green, five-minute candle following the report to consider a long Australian dollar trade
  • If market reaction favors a long trade, buy AUD/USD with two separate position
  • Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward
  • Move stop to entry on remaining position once initial target is hit, set reasonable limit

Bearish AUD Trade: Employment Report Falls Short of Market Forecast

  • Need red, five-minute candle to favor a short AUDUSD trade
  • Implement same setup as the bullish Australian dollar trade, just in opposite direction

Potential Price Targets For The Release

AUD/USD Daily

AUD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Has Yet to Fill Opening Gap on Close Basis; Long-Term Bearish Trend Remains in Focus
  • Fails to Preserve Bullish RSI Momentum; Lower High in Place?
  • Interim Resistance: 0.9200 (100.0% expansion) to 0.9210 (61.8% retracement)
  • Interim Support: 0.8670 (100.0% expansion) to 0.8700 (78.6% retracement)

Impact that the change in Australia Employment has had on AUD during the last month

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

Jan 2014

02/13/2014 00:30 GMT

15.0K

-3.7K

-67

-39

January 2014 Australia Employment Change

Australia Employment Change

The Australian Dollar suffered instant losses as the January Employment Change figure came in at -3.7K vs. a positive 15.0K estimate. In addition, prior figures were revised slightly lower. The move lower put in a higher low and the Australian Dollar regained all of the employment change losses within a few days. Despite a relatively upbeat RBA, strong housing data and a better than expected GDP figure, the employment front in Australia has been weak and a missed print could prompt further Aussi losses, most notably against the Yen if we see risk aversion and/or a selloff in equities continue this week.

--- Written by David Song, Currency Analyst and Gregory Marks

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

To get the latest AUD/USD news and analysis click here

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12 March 2014 21:00 GMT