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AUD/USD to Eye 0.9500 on Strong Australian Employment Report

AUD/USD to Eye 0.9500 on Strong Australian Employment Report

2014-07-09 21:00:00
David Song, Currency Strategist
Share:

- Australia Employment to Increase for Fifth Time in 2014.

- Jobless Rate to Uptick to an Annualized 5.9%- Highest Since February.

Trading the News: Australia Employment Change

The AUD/USD may continue to retrace the decline from the beginning of the month as the Australian economy is expected to add 12.0K jobs in June.

What’s Expected:

AUD/USD Employment

Click Here for the DailyFX Calendar

Why Is This Event Important:

However, an uptick in the jobless rate may spark a mixed reaction in the AUD/USD as the Reserve Bank of Australia (RBA) persistently highlight the ongoing slack in the labor market, and Governor Glenn Stevens may continue to toughen the verbal intervention on the Australian dollar in an effort to further assist with the rebalancing of the $1T economy.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Building Approvals (MoM) (MAY)

3.2%

9.9%

AiG Performance of Construction Index (JUN)

--

51.8

Gross Domestic Product s.a. (QoQ) (1Q)

0.9%

1.1%

The pickup in building activity may produce a strong rebound in employment as the central bank keeps the benchmark interest rate at the record-low, and the accommodative policy stance may continue to boost private sector activity as Governor Stevens expects a moderate recovery.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Retail Sales (MoM) (MAY)

0.0%

-0.5%

Trade Balance (MAY)

-200M

-1911M

AiG Performance of Manufacturing Index (JUN)

--

48.9

However, weakening demands at home and abroad may push businesses to scale back on hiring, and a dismal employment print may put increased pressure on the RBA to further embark on its easing cycle in an effort to encourage a stronger recovery.

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How To Trade This Event Risk(Video)

Bullish AUD Trade: Employment Climbs 12.0K+, Jobless Rates Holds at 5.8%

  • Need green, five-minute candle following the statement 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 Job Report 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 the opposite direction

Potential Price Targets For The Release

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AUD/USD Daily

AUD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Ascending Channel Formation Remains Favored, But RBA Verbal Intervention May Cap Topside Targets
  • Interim Resistance: 0.9500 (38.2% retracement) to 0.9520 (78.6% retracement)
  • Interim Support: 0.9330 (61.8% expansion) to 0.9340 (61.8% retracement)

Impact that Australia’s Employment report 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)

MAY 2014

06/12/2014 4:30 GMT

10.0K

-4.8K

-6

+41

May 2014 Australia Employment Change

AUD/USD Chart

Employment in Australia unexpectedly slipped 4.8K in May to mark the first decline since December, while the jobless rate held steady at an annualized 5.8% for the third consecutive month. The weaker-than-expected print dragged on the Australian dollar, with the AUD/USD dipping below the 0.9350 region, but the market reaction was short-lived as the pair ended the day at 0.9422.

Read More:

AUDUSD July Range Targets Key Support- Shorts Favored Sub 9440

GBPJPY Targets Channel Support- Longs Favored Above 173.75

--- 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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