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Weak Australian Job Growth to Fuel Bearish AUDUSD Outlook

Weak Australian Job Growth to Fuel Bearish AUDUSD Outlook

David Song, Gregory Marks,

- Australia Employment to Increase for Third Month; Jobless Rate to Rise to 5.8%

- Job Growth Missed Market Forecast for the Last Four Prints

Trading the News: Australia Employment Change

The near-term rebound in the AUDUSD may gather pace over the next 24-hours of trading as Australia is expected to add another 10.0K jobs in November.

What’s Expected:

Time of release: 12/12/2013 0:30 GMT, 19:30 EST

Primary Pair Impact: AUDUSD

Expected: 10.0K

Previous: 1.1K

DailyFX Forecast: -10.0K to 5.0K

Why Is This Event Important:

A pickup in job growth may encourage the Reserve Bank of Australia (RBA) to adopt a more neutral tone for monetary policy, but Governor Glenn Stevens may continue to push for a weaker exchange rate in an effort to further assist with the rebalancing of the real economy.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

AiG Performance of Construction Index (NOV)

--

55.2

Private Capital Expenditure (3Q)

-1.2%

3.6%

Construction Work Done (3Q)

0.5%

2.7%

The rise in building activity may ultimately produce a positive employment report, and a larger-than-expected rise in job growth may keep the RBA on the sidelines as the previous rate cuts continue to work their way through the $1T economy.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

NAB Business Confidence (NOV)

--

5

Trade Balance (OCT)

-350M

-529M

Gross Domestic Product (QoQ) (3Q)

0.7%

0.6%

However, the slowing recovery along with the downturn in global trade may lead to another disappointing print, and the underlying weakness in the economy may encourage the RBA to further embark on its easing cycle as the outlook for growth and inflation remains tilted to the downside.

How To Trade This Event Risk(Video)

Bullish AUD Trade: Employment Increases 10.0K or Greater

  • Need green, five-minute candle following the print to consider a long Australian dollar trade
  • If market reaction favors a long trade, buy AUDUSD 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: Job Growth Misses Forecast for Fifth Month

  • 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

AUDUSD Daily

Forex_Weak_Australian_Job_Growth_to_Fuel_Bearish_AUDUSD_Outlook_body_Picture_2.png, Weak Australian Job Growth to Fuel Bearish AUDUSD Outlook

Chart - Created Using FXCM Marketscope 2.0

  • Downward Trend Remains in Focus; Poised for Lower Low Following Lower High
  • Despite the Topside Break, RSI Also Carved Lower High
  • Interim Resistance: 0.9250 (23.6 retracement) to 0.9290 Pivot
  • Interim Support: 0.8990 Pivot to 0.9000 (1.618 expansion)

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)

OCT 2013

11/07/2013 00:30 GMT

10.6K

1.1K

-48

-52

October 2013 Australia Employment Change

Forex_Weak_Australian_Job_Growth_to_Fuel_Bearish_AUDUSD_Outlook_body_Picture_1.png, Weak Australian Job Growth to Fuel Bearish AUDUSD Outlook

Australia’s Employment Change figure missed for the 4th consecutive time in October as the print came in at 1.1K vs. 10.6K estimated while the prior print was revised lower from 9.1K to 3.3K. The Aussi continued to come under pressure in the weeks following the employment reading as GDP came in at 2.3% vs. 2.6% expected. As for insight into this print, Total Job Advertisements month over month came in at -0.8% for November while Qantas Airlines announced it would be cutting 1,000 jobs to stem losses. Although negative data continues to come out of Australia, poor employment and GDP prospects have been mostly priced in as the Aussi looks for support amid a weakening Dollar this week.

--- Written by David Song, Currency Analyst

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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