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AUDUSD to Carve Lower High on Dismal Employment Report

AUDUSD to Carve Lower High on Dismal Employment Report

2014-02-12 22:00:00
David Song, Gregory Marks,
Share:

- Australia Employment Increased Six-Times in 2013

- Jobless Rate to Rise to 5.9%- Highest Since June 2009

Trading the News: Australia Employment Change

The Australian dollar may face a more meaningful rebound over the next 24-hours of trading as the region is expected to add 15.0K jobs in January.

What’s Expected:

Time of release: 02/13/20140:30 GMT, 19:30 EST

Primary Pair Impact: AUDUSD

Expected: 15.0K

Previous: -22.6K

DailyFX Forecast: -15.0K to 5.0K

Why Is This Event Important:

However, an uptick in the jobless rate to an annualized 5.9% may limit the market reaction to positive jobs report as the Reserve Bank of Australia (RBA) sees higher unemployment in the region, and the higher-yielding currency may struggle to hold its ground over the remainder of the week should the data renew bets for a rate cut.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

House Price Index (QoQ) (4Q)

3.0%

3.4%

NAB Business Confidence (JAN)

--

8

Trade Balance (DEC)

-200M

468M

The rise in business confidence along with the pickup in global trade may generate a positive employment report, and a marked rise in job growth may spur a more meaningful rally in the AUDUSD as it dampens the scope for lower borrowing costs in the $1T economy.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Westpac Consumer Confidence s.a. (MoM) (FEB)

--

-3.0%

Retail Sales ex Inflation (QoQ) (4Q)

1.2%

0.9%

ANZ Job Advertisements (MoM) (JAN)

--

-0.3%

However, we may see businesses scale back on hiring amid the slowdown in private consumption paired with the persistent slack in the real economy, and Governor Glenn Stevens may have little choice but to further assist with the rebalancing of the real economy as growth is expected to hold below target over the policy horizon.

How To Trade This Event Risk(Video)

Bullish AUD Trade: Australia Employment Climbs 15.0K 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, Unemployment Rate Disappoints

  • 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_AUDUSD_to_Carve_Lower_High_on_Dismal_Employment_Report_body_Picture_2.png, AUDUSD to Carve Lower High on Dismal Employment Report

Chart - Created Using FXCM Marketscope 2.0

  • Remains in Topping Process- Lower High in Place?
  • Break of RSI Trendline Support to Highlight End of Near-Term Correction
  • Interim Resistance: 0.9050 (23.6% expansion) to 0.9070 (38.2% retracement)
  • Interim Support: 0.8670 (100.0% expansion) to 0.8700 (78.6% 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)

DEC 2013

01/16/2014 00:30 GMT

9.8K

-22.6K

-88

-72

December 2013 Australia Employment Change

Forex_AUDUSD_to_Carve_Lower_High_on_Dismal_Employment_Report_body_Picture_1.png, AUDUSD to Carve Lower High on Dismal Employment Report

Seasonally adjusted employment change figures out of Australia indicated a 22.6K decline versus estimates of a 9.8K gain. This negative data sent that Aussi to fresh multi-year lows below those set over the summer. AUD/USD found little support from there as the pair continued to press fresh lows into the end of the month. Since then, we have seen a batch of positive data and improved risk sentiment and this has driven AUD/USD above 0.90 as of late. With that level being the unofficial line in the sand, poor employment data could easily drive the pair back below the key .90 level.

--- 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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