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AUD/USD to Face Larger Rebound on Strong Australia Employment Report

AUD/USD to Face Larger Rebound on Strong Australia Employment Report

2015-11-12 21:00:00
David Song, Shuyang Ren,
Share:

- Australia Employment to Increase for Seventh Time in Last 10-Months.

- Jobless Rate to Hold Steady at Annualized 6.2 for Third Straight Month.

For more updates, sign up for David's e-mail distribution list.

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.

What’s Expected:

AUD/USD Australia Employment

Click Here for the DailyFX Calendar

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

Release

Expected

Actual

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

Release

Expected

Actual

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

AUD/USD Daily

AUD/USD Daily Chart

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

(1 Hour post event )

Pips Change

(End of Day post event)

SEP 2015

10/15/2015 00:30 GMT

9.6K

-5.1K

-31

-16

September 2015Australia Employment Change

AUD/USD Chart

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.

Read More:

AUD/JPY Flirting with Pivotal Support

AUD/USD Near Term Downtrend While Below .7223

Price & Time: USD/MXN: Still In Search Of Directional Clarity

--- Written by David Song, Currency Analyst and Shuyang Ren

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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