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AUD/USD to Face Larger Rebound on Upbeat Australia Employment Report

AUD/USD to Face Larger Rebound on Upbeat Australia Employment Report

2014-12-10 22:00:00
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

Another 15.0K rise in Australia Employment may generate a more meaningful rebound in AUD/USD as it boosts the growth and inflation outlook for the $1T economy.

What’s Expected:

AUD/USD Australia Employment

Click Here for the DailyFX Calendar

Why Is This Event Important:

However, the long-term outlook for AUD/USD remains bearish as the Reserve Bank of Australia (RBA) remains in no rush to normalize monetary policy, and the bearish sentiment surrounding the aussie may gather pace in the year ahead especially as Governor Glenn Stevens retains the verbal intervention on the local currency.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Retail Sales (MoM) (OCT)

0.1%

0.4%

Building Approvals (MoM) (OCT)

5.0%

11.4%

Private Sector Credit (MoM) (OCT)

0.5%

0.6%

Australian firms may continue to expand their labor force amid the pickup in private consumption along with the ongoing expansion in building activity, and a positive employment may heighten the appeal of the Australian dollar as it raise the RBA’s scope to normalize monetary policy sooner rather than later.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

NAB Business Confidence (NOV)

--

1

Gross Domestic Product s.a. (QoQ) (3Q)

0.7%

0.3%

AiG Performance of Services Index (NOV)

-1850M

-2261M

However, waning business confidence paired with the deeper contraction in service-based activity may drag on job growth, and a dismal development may spark another selloff in AUD/USD as it puts increased pressure on the RBA to revert back to its easing cycle.

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How To Trade This Event Risk(Video)

Bullish AUD Trade: Australia Employment Expands 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 Rate 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:

Gold Scalps Target Key Inflection Range- Rally at Risk Sub-$1237

Price & Time: Key Level Awaits The Euro

Potential Price Targets For The Release

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AUD/USD Daily Chart

AUD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the bearish trend, RSI rebounds ahead of support & may highlight a larger correction in AUD/USD should the oscillator come off of oversold territory.
  • Interim Resistance: 0.8530 (50.0% expansion) to 0.8540 (50.0% retracement)
  • Interim Support: 0.8150 (100% expansion) to 0.8200 pivot.

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)

OCT 2014

11/06/2014 1:30 GMT

20.0K

24.1K

-8

+34

October 2014Australia Employment Change

AUD/USD Chart

Australia employment advanced 24.1K in October following a revised 23.7K contraction the month prior, while the jobless rate printed at a 12-year high of 6.2%. Despite the better-than-expected print, the persistent slack in the labor market may continue to limit the Reserve Bank of Australia’s (RBA) scope to lift the benchmark interest rate off of the record-low as the central bank aims for a more sustainable recovery. Despite the initial bearish reaction in AUD/USD, the Australian dollar recouped the losses throughout the day as the pair closed at 0.8616.

--- 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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