RBA Inspired AUD Rebound to Gather Pace on Strong Employment Report
- Australia Employment Projected to Increase for Third Consecutive Month.
- Jobless Rate to Uptick for Second Month to Annualized Rate of 6.1%.
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Trading the News: Australia Employment Change
Another 10.0K expansion in Australia Employment may pave the way for a more meaningful rebound in AUD/USD as signs of a stronger recovery dampens the Reserve Bank of Australia’s (RBA) scope to further embark on its easing cycle.
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Why Is This Event Important:
The RBA may largely retain its current policy stance throughout 2015 as the central bank turns upbeat towards the economy, and we may see Governor Glenn Stevens continue to soften the verbal intervention on the local currency as the outlook for growth and inflation improves.
Expectations: Bullish Argument/Scenario
|Retail Sales ex Inflation (QoQ) (2Q)||0.4%||0.8%|
|NAB Business Confidence (2Q)||--||4|
|New Motor Vehicle Sales (MoM) (JUN)||--||3.8%|
Improved business confidence along with the pickup in private-sector consumption may foster a better-than-expected employment report, and a marked expansion in job growth may heighten the appeal of the aussie as market participants scale back bets for lower borrowing-costs.
Risk: Bearish Argument/Scenario
|ANZ Job Advertisements (MoM) (JUL)||--||-0.4%|
|Building Approvals (MoM) (JUN)||-1.0%||-8.2%|
|Home Loans (MoM) (MAY)||-3.0%||-6.1%|
Nevertheless, the ongoing slack in the real economy may drag on the labor market, and a dismal employment print may undermine the near-term rebound in AUD/USD as it raises the risk of seeing another RBA rate cut.
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How To Trade This Event Risk(Video)
Bullish AUD Trade: Employment Climbs Another 10.0K 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: 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.
Potential Price Targets For The Release
Chart - Created Using FXCM Marketscope 2.0
- Even though the RBA softens its verbal intervention on the Australian dollar, long-term forecast for AUD/USD remains bearish amid the divergence in the policy divergence with the Federal Reserve; will continue to favor the downside targets as long as price & the relative strength index retain the bearish trend carried over from back in May.
- DailyFX Speculative Sentiment Index (SSI) shows the retail crowd remains net-long AUD/USD since May 15, but the ratio appears to be working its way back towards recent extremes as it pushes to +1.90 with 66% of traders long.
- Interim Resistance: 0.7570 (50% expansion) to 0.7590 (100% expansion)
- Interim Support: 0.7233 (July low) to 0.7240 (100% 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||Pips Change|
|JUN 2015||07/09/2015 01:30 GMT||0.0K||7.3K||+39||+37|
June 2015Australia Employment Change
Australia’s Employment report topped market forecasts as the economy added another 7.3K jobs in June following the 40.0K expansion the month prior. At the same time, the jobless rate up ticked to an annualized rate of 6.0% from a revised 5.9% during the same period, which was accompanied by an increase in the Labor Participation Rate as the figure widened to 64.8% from 64.7% in May. Following the Reserve Bank of Australia (RBA) rate cut at the May 5 meeting, signs of a stronger recovery may encourage the central bank to retain a wait-and-see approach throughout 2015 as the benchmark interest rate sits at the record-low. The Australian dollar traded higher following the better-than-expected report, with AUD/USD climbing above the 0.7450 region, but the pair struggled to hold its ground as it ended the day at 0.7443.
--- Written by David Song, Currency Analyst and Shuyang Ren
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