AUD/USD to Face Larger Rebound on Strong Australia Employment Report
- Australia Employment to Increase for Seventh Time in Last 10-Months.
- Jobless Rate to Hold Steady at Annualized 6.2 for Third Straight Month.
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Trading the News: Australia Employment Change
A 15.0K rebound in Australia Employment may spark a larger rebound in AUD/USD as signs of a stronger recovery provide the Reserve Bank of Australia (RBA) with greater flexibility to carry its current policy into 2016.
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Why Is This Event Important:
Even though RBA Governor Glenn Stevens keeps the door open to implement lower borrowing-costs, a further improvement in the labor market may encourage the central bank to stick to its current wait-and-see approach at the December 1 interest rate decision as the board sees a sustainable recovery ahead.
Expectations: Bullish Argument/Scenario
|Home Loans (MoM) (SEP)||0.0%||2.0%|
|Retail Sales (MoM) (SEP)||0.4%||0.4%|
|Building Approvals (MoM) (SEP)||1.0%||2.2%|
The pickup in private-sector consumption accompanied by the ongoing expansion in building activity may push Australian firms to increase their labor force, and a marked rebound in job growth may heighten the appeal of the aussie as it boosts interest rate expectations.
Risk: Bearish Argument/Scenario
|Investment Lending (SEP)||--||-8.5%|
|NAB Business Confidence (OCT)||--||2|
|Conference Board Leading Index (MoM) (AUG)||--||-0.4%|
However, the weakening outlook for global growth paired with waning business confidence may drag on employment, and a dismal jobs report may put increased pressure on the RBA to implement additional rate-cuts in an effort to further assist with the rebalancing of the real economy.
How To Trade This Event Risk(Video)
Bullish AUD Trade: Employment Rebounds 15.0K or Greater
- Need green, five-minute candle following the report for a potential long AUD/USD trade.
- If market reaction favors a long aussie 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 breakeven on remaining position once initial target is met, set reasonable limit.
Bearish AUD Trade: Australia Labor Employment Disappoints
- Need red, five-minute candle to consider a short AUD/USD position.
- Carry out the same setup as the bullish aussie trade, just in reverse.
Potential Price Targets For The Release
Chart - Created Using FXCM Marketscope 2.0
- AUD/USD stands at risk of giving back the rebound from back in September (0.6906) as the pair remains stuck in a downward trending channel, while the Relative Strength Index (RSI) preserves the bearish formation carried over from the previous month.
- DailyFX Speculative Sentiment Index (SSI) shows the retail crowd remains net-long AUD/USD since May 15, but the ratio appears to be approaching recent extremes as it climbs to +2.70, with 73% of traders long.
- Interim Resistance: 0.7380 (50% retracement) to 0.7390 (78.6% expansion)
- Interim Support: 0.6830 (161.8% expansion) to 0.6860 (61.8% expansion)
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Impact that Australia Employment Change has had on AUD during the last release
|Period||Data Released||Estimate||Actual||Pips Change||Pips Change|
|SEP 2015||10/15/2015 00:30 GMT||9.6K||-5.1K||-31||-16|
September 2015Australia Employment Change
Australia unexpectedly shed 5.1K jobs in September following a revised 18.1K expansion the month prior. Nevertheless, the unemployment held steady at an annualized rate of 6.2% during the same period, while the participation fell to 64.9% from 65.0% as discouraged workers left the labor force. A further deterioration in the labor market may put increased pressure on the Reserve Bank of Australia (RBA) to implement lower borrowing-costs, but its seems as though Governor Glenn Stevens will largely endorse a wait-and-see approach throughout 2015 as the rate-cuts from earlier this year continue to work through the real economy. The bearish reaction in the Australian dollar was short-lived, with AUD/USD bouncing back ahead of the 0.7300 handle to close the Asian/Pacific session at 0.7330.
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--- Written by David Song, Currency Analyst and Shuyang Ren
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