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AUD/USD Rebound Vulnerable to Australia Employment Revisions

AUD/USD Rebound Vulnerable to Australia Employment Revisions

2014-10-08 21:00:00
David Song, Shuyang Ren,
Share:

- Australia Employment to Increase for Seventh Month in 2014.

- Jobless Rate to Hold at Annualized 6.1% for Second Straight Month.

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Trading the News: Australia Employment Change

Another 15.5K rise in Australia Employment may generate a more meaningful rebound in the AUD/USD as it puts increased pressure on the Reserve Bank of Australia (RBA) to normalize monetary policy sooner rather than later.

What’s Expected:

AUD/USD Employment Change

Click Here for the DailyFX Calendar

Why Is This Event Important:

However, trading the data print may not be as clear cut as the Australian Bureau of Statistics looks to revise the July and August prints, and RBA Governor Glenn Stevens may continue to endorse a neutral policy stance throughout the remainder of 2014 in an effort to mitigate the downside risks for growth and inflation.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

AiG Performance of Construction Index (SEP)

--

59.1

Building Approvals (MoM) (AUG)

1.0%

3.0%

Trade Balance (AUG)

-800M

-787M

The housing boom may continue to boost job growth as the RBA keeps the benchmark interest rate the record-low of 2.50%, and a positive employment print may fuel interest rate expectations as the central bank remains upbeat on the rebalancing of the $1T economy.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

AiG Performance of Services Index (SEP)

--

45.4

Retail Sales (MoM) (AUG)

0.4%

0.1%

AiG Performance of Manufacturing Index (SEP)

--

46.5

Nevertheless, the jobs report may disappoint amid the slowdown in private consumption along with the ongoing contraction in business outputs, and a dismal reading may spur a test of the monthly low (0.8641) as it dampens bets for higher borrowing costs.

How To Trade This Event Risk(Video)

Bullish AUD Trade: Employment Climbs 15.5K or Greater

  • Need green, five-minute candle following an upbeat report for a potential long AUD/USD trade
  • If market reaction favors a bullish 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 Growth 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

Read More:

Price & Time: Pro-Risk Markets At Key Juncture

Australian Dollar Remains a Sell until this Changes

Potential Price Targets For The Release

AUD/USD Daily

AUD/USD Daily

Chart - Created Using FXCM Marketscope 2.0

  • Need a close above 0.8820 (23.6% retracement) to favor a larger rebound
  • Interim Resistance: 0.8920 (50.0% expansion) to 0.8930 (38.2% retracement)
  • Interim Support: 0.8525 (50.0% expansion) to 0.8550 (38.2% 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)

AUG 2014

09/11/2014 1:30 GMT

15.0K

121.0K

+31

+5

August 2014 Australia Employment Change

AUD/USD Chart

The Australian economy added 121K jobs in August, with the unemployment unexpectedly slipping to an annualized 6.1% from a 12-year high of 6.4% in July. Despite the ongoing improvement of the job market, it seems as though Reserve Bank of Australia (RBA) Governor Glenn Stevens will keep rates on hold throughout 2014 in an effort to further assist with the rebalancing of the real economy. Nevertheless, the better-than-expected reading propped up the Australian dollar, with the AUD/USD breaking above the 0.9200 handle, but the pair struggled to retain the gains throughout the Asia-Pacific trade, with the aussie-dollar ending the day at 0.9160.

--- 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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