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AUD/USD to Face Larger Rebound on Upbeat Employment Report

AUD/USD to Face Larger Rebound on Upbeat Employment Report

2014-09-10 21:00:00
David Song, Shuyang Ren,
Share:

- Australia Employment Expected to Increase for Sixth Time in 2014.

- Jobless Rate of 6.3% Would Mark Second-Highest Reading for 2014.

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

Trading the News: Australia Employment Change

The AUD/USD may face a larger rebound over the next 24-hours of trade as the employment report is expected to show the $1T economy adding 15.0K jobs in August.

What’s Expected:

AUD/USD Employment

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Why Is This Event Important:

A rebound in employment may encourage the Reserve Bank of Australia (RBA) to retain its current policy throughout the remainder of the year, but a further deterioration in the labor market may drag on interest rate expectations as the central bank cuts its growth and inflation forecast.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Gross Domestic Product s.a. (QoQ) (2Q)

0.4%

0.5%

Building Approvals (MoM) (JUL)

1.9%

2.5%

Retail Sales (MoM) (JUL)

0.4%

0.4%

The pickup in private sector activity may encourage firms to ramp up on hiring, and a positive employment report may lead the AUD/USD to retrace the decline from earlier this month as it raises the RBA’s scope to normalize monetary policy sooner rather than later.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

NAB Business Confidence (AUG)

--

8

Net Exports of GDP (2Q)

-0.70

0.90

Company Operating Profits (QoQ) (2Q)

-2.0%

-6.9%

However, the downtick in business sentiment along with the weakening outlook for global trade may drag on the labor market, and a dismal print may highlight a bearish outlook for the AUD/USD as it renews bets for a rate cut.

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How To Trade This Event Risk(Video)

Bullish AUD Trade: Employment Climbs 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: Job Growth, Unemployment Disappoint

  • 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

Read More:

AUD/USD Top Measures to 0.8906, EUR/JPY Revisits 138.05 Resistance

Gold Rudderless, Crude Oil Clings to Support Before Inventories Data

Potential Price Targets For The Release

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AUD/USD Daily

AUD/USD Daily

Chart - Created Using FXCM Marketscope 2.0

  • Bearish trend in price & RSI favor downside targets; Will look for a lower-high on a near-term correction
  • Interim Resistance: 0.9280 (78.6% expansion) to 0.9300 (23.6% retracement)
  • Interim Support: 0.9070 (38.2% retracement) to 0.980 (50.0% retracement)

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)

JUL 2014

08/07/2014 1:30 GMT

13.2K

-0.3K

-57

-75

July 2014 Australia Employment Change

AUD/USD to Face Larger Rebound on Upbeat Employment Report

Employment in Australia contracted 0.3K in July compared to the previous month’s 14.9K increase, while the unemployment rate unexpectedly climbed to an annualized 6.4% from 6.0% in June as discouraged workers returned to the labor force. As the RBA continues to see a ‘moderate’ recovery this year, the ongoing weakness in the labor market may give the central bank little room to maneuver amid the rebalancing in the $1T economy. The lackluster reading dragged on the aussie-dollar, with the AUD/USD dropping 57 pips within an hour and ending the day at 0.9268.

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

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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