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Bullish AUD/USD Outlook Mired by Higher Australia Unemployment

Bullish AUD/USD Outlook Mired by Higher Australia Unemployment

2015-05-06 21:00:00
David Song, Shuyang Ren,
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- Australia Employment Expected to Increase for Third-Consecutive Month.

- Participation Rate to Hold Steady at 64.8% for Second-Month; Highest Since July 2014.

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Trading the News: Australia Employment Change

Another 4.0K rise in Australia Employment may heighten the appeal of the aussie and trigger a larger advance in AUD/USD as the recent shift in the forward-guidance of monetary suggests that the Reserve Bank of Australia (RBA) is nearing the end of its easing cycle.

What’s Expected:

Bullish AUD/USD Outlook Mired by Higher Australia Unemployment

Click Here for the DailyFX Calendar

Why Is This Event Important:

However, a marked slowdown in job growth paired with a further expansion in the unemployment rate may undermine the near-term outlook for the higher-yielding currency and put increased pressure on the RBA to provide additional monetary support in an effort to encourage a stronger recovery.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Building Approvals (MoM) (MAR)

-1.5%

2.8%

ANZ Job Advertisements (MoM) (APR)

--

2.3%

AiG Performance of Construction Index (MAR)

--

50.1

The rebound in building activity may encourage a positive employment report, and a further expansion in the labor market may prompt fresh monthly highs in AUD/USD especially as the RBA adopts an improved outlook for the region.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Retail Sales (MoM) (MAR)

0.4%

0.3%

Trade Balance (MAR)

-1.000B

-1.322B

NZD Business Confidence (1Q)

--

0

However, slowing demand from home and abroad may push Australian firms to scale back on hiring, and a slowdown in job growth may renew bets for additional monetary support amid the ongoing weakness in the real economy.

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How To Trade This Event Risk(Video)

Bullish AUD Trade: Australia Adds 4.0K or More Jobs in April

  • 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: Employment Report Falls Short of Market Expectations

  • 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: Buy the Dip or Sell The Rip?

Bearish EUR/USD Retail Sentiment Remains Despite Fresh May Highs

Potential Price Targets For The Release

AUD/USD Daily Chart

AUD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Will stay constructive on AUD/USD as it retains the bullish RSI momentum, but the series of failed attempts to close above the former support region raises the risk for a near-term topping process in aussie-dollar.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd has flipped back to net-short AUD/USD on May 4, with the ratio slipping back to -1.23.
  • Interim Resistance: 0.8000 (61.8% retracement) to 0.8020 (38.2% expansion)
  • Interim Support: 0.7710 (23.6% retracement) to 0.7740 (78.6% expansion)

Join DailyFX on Demandfor Real-Time Updates on the DailyFX Speculative Sentiment Index!

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)

MAR 2015

04/16/2015 00:30 GMT

15.0K

37.7K

+46

+27

March 2015 Australia Employment Change

AUD/USD Chart

The Australian employment largely exceeded market forecast as the economy added another 37.7K jobs in March following the revised 42.0K expansion the month prior. At the same time, the jobless rate dropped to 6.1% from a revised 6.2%, with the participation rate climbing to 64.8% from 64.7% to mark the highest reading since July. Despite the ongoing improvements in the labor market, the Reserve Bank of Australia (RBA) may continue to embark on its easing cycle as Governor Glenn Stevens keeps the door open to further reduce the cash rate. The initial bullish reaction in the Australian dollar was short-lived as AUD/USD struggled to hold above the 0.7775, with the pair consolidating throughout the Asia/Pacific trade to end the session at 0.7740.

--- 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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