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AUD/USD Outlook at Risk as Australia Unemployment Hits 11-Year High

By , Currency Analyst  and Gregory Marks
09 April 2014 21:00 GMT

- Australia Employment to Increase for Third Consecutive Month

- Jobless Rate to Climb to 11-Year High of 6.1%

Trading the News: Australia Employment Change

The AUD/USD may continue to mark fresh monthly highs over the next 24-hours of trading as the Australian economy is expected to add another 2.5K jobs in March.

What’s Expected:

AUDUSD-Outlook-at-Risk-as-Australia-Unemployment-Hits-11-Year-High_body_ScreenShot043.png, AUD/USD Outlook at Risk as Australia Unemployment Hits 11-Year High

Why Is This Event Important:

However, the market reaction may not be clear cut as the February print as the jobless rate is projected to hit an 11-year high of 6.1%, and a dismal employment report may put increased pressure on the Reserve Bank of Australia (RBA) to further embark on its easing cycle in an effort to further assist with the rebalancing of the real economy.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

ANZ Job Advertisement (MoM) (MAR)

--

1.4%

Trade Balance (FEB)

800M

1200M

Gross Domestic Product (QoQ) (4Q)

0.7%

0.8%

The ongoing rise in job advertisements paired with the widening trade surplus may pave the way for a positive employment report, and a marked rise in job growth could generate a bullish reaction in the AUD/USD as market participants see the RBA retaining its current policy throughout 2014.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

NAB Business Confidence (MAR)

--

4

Retail Sales (MoM) (FEB)

0.3%

0.2%

Company Operating Profits (QoQ) (4Q)

2.0%

1.7%

Nevertheless, narrowing profits along with the decline in business confidence may drag on hiring, and a further deterioration in the labor market may weigh on the Australian dollar as it dampens the outlook for growth and inflation.

How To Trade This Event Risk (Video)

Join DailyFX on Demandto Cover Current Australian dollar Trade Setups

Bullish AUD Trade: Employment Climbs 2.5K or Greater

  • 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: Labor Report Disappoints

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

Potential Price Targets For The Release

AUD/USD Daily Chart

AUD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Threaten Trendline Resistance, But Need RSI to Fall Back Below 70 to Look for Pullback
  • Interim Resistance: 0.9400 Pivot to 0.9420 (38.2 expansion)
  • Interim Support: 0.9200 (100.0 expansion) to 0.9220 (61.8 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)

FEB 2014

03/13/2014 00:30 GMT

15.0K

47.3K

+42

+14

February 2014 Australia Employment Change

AUDUSD-Outlook-at-Risk-as-Australia-Unemployment-Hits-11-Year-High_body_Picture_1.png, AUD/USD Outlook at Risk as Australia Unemployment Hits 11-Year High

Last month the Australian Dollar jumped over 50pips at the print of the February employment data figures as they came in over three times market expectations. Since then we have been moving higher, but at these levels and in the context of pressure on equities last week, any return of USDollar strength could quickly reverse progress made. Still, in the current environment of continuous Dollar weakness it would prove irresponsible to pick tops. Nevertheless, it is important to note that a poor employment print or CPI figure could be that fundamental catalyst needed for a return of USD strength.

--- 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.

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09 April 2014 21:00 GMT