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AUD/USD Nov. Advance at Risk on Dismal Australia Employment Report

AUD/USD Nov. Advance at Risk on Dismal Australia Employment Report

2015-12-09 20:55:00
David Song, Shuyang Ren,
Share:

- Australia Employment to Contract for Fourth-Time in Last 11 Months.

- Jobless Rate to Increase to Annualized 6.0% From Lowest Reading Since May 2014.

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

Trading the News: Australia Employment Change

AUD/USD stands at risk of giving back the advance from the November low (0.7015) as Australia’s labor report is anticipated to show a 10.0K contraction in employment accompanied by an uptick in the jobless rate, which may put increased pressure on the Reserve Bank of Australia (RBA) to further embark on its easing cycle in 2016.

What’s Expected:

AUD/USD Australia Employment

Click Here for the DailyFX Calendar

Why Is This Event Important:

Even though the RBA currently sticks to a wait-and-see approach, Governor Glenn Stevens may take additional steps to insulate the real economy and push the benchmark interest rate to a fresh record-low next year as the central bank keeps the door open to implement higher borrowing-costs.

Expectations: Bearish Argument/Scenario

Release

Expected

Actual

Trade Balance (OCT)

-2.600B

-3.305B

Private Capital Expenditure (3Q)

-2.9%

-9.2%

Construction Work Done (3Q)

-2.0%

-3.6%

The weakening outlook for global growth paired with efforts to cool the housing market may drag on hiring, and a marked decline in employment may spark a bearish reaction in the Australia dollar as it weighs on interest rate expectations.

Risk: Bullish Argument/Scenario

Release

Expected

Actual

NAB Business Confidence (NOV)

--

5

Retail Sales (MoM) (OCT)

0.4%

0.5%

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

0.8%

0.9%

Nevertheless, improved confidence along with the pickup in private-sector activity may generate another strong employment report, and an unexpected expansion in job growth may encourage the RBA to adopt a more hawkish tone in 2016 as it raises the outlook for growth and inflation.

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How To Trade This Event Risk(Video)

Bearish AUD Trade: Employment Contracts 10.0+K, Jobless Climbs to 6.0% or Higher

  • Need red, five-minute candle following the report for a potential short AUD/USD trade.
  • If market reaction favors a short aussie trade, sell AUD/USD with two separate position.
  • Set stop at the near-by swing high/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.

Bullish AUD Trade: Australia Labor Employment Disappoints

  • Need green, five-minute candle to consider a long AUD/USD position.
  • Carry out the same setup as the bearish aussie trade, just in the opposite direction.

Potential Price Targets For The Release

AUD/USD Daily

AUD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • AUD/USD may continue to give back the advance from the November low (0.7015) as the pair fails to retain the ascending channel formation; will keep a close eye on the Relative Strength Index (RSI) as it looks poised to test the bullish pattern carried over from September, while the aussie-dollar carves a near-term series of lower highs & lows.
  • DailyFX Speculative Sentiment Index (SSI) shows the retail crowd remains net-short AUD/USD since November 19, but the ratio remains off of recent extremes as it sits at -1.26, with 44% of traders long.
  • Interim Resistance: 0.7380 (50% retracement) to 0.7390 (78.6% expansion)
  • Interim Support: 0.6830 (161.8% expansion) to 0.6860 (61.8% expansion)

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 2015

11/11/2015 00:30 GMT

15.0K

58.6K

+83

+81

October 2015Australia Employment Change

AUD/USD Chart

Australia Employment surged 58.6K jobs in October following a revised 0.8K contraction the month prior, with the Unemployment Rate also beating market expectations as the figure narrowed to an annualized 5.9% from 6.2% during the same period even as the labor participation rate increased to 65.0% from 64.9%. Despite expectations for below-trend growth, signs of a stronger recovery may encourage the Reserve Bank of Australia (RBA) to carry its wait-and-see approach into 2016 as the previous rate-cuts continue to work their way through the real economy. The Australian dollar gained ground following the better-than-expected prints, with AUD/USD climbing above the 0.7100 handle to end the Asian-Pacific trade at 0.7142.

*As we approach the holidays and thus illiquid markets, it's worth reviewing principles that help protect your capital. We call these principles the "Traits of Successful Traders."

Three Factors Warn of Perfect Storm in FX Markets - Caution Advised

Read More:

Price & Time: USD/MXN – Big Break Ahead?

COT-Small British Pound Traders are Most Short Since April Low

December Forex Seasonality Foresees Mixed US Dollar, S&P 500 Rally

Webinar: USD Setups in Focus as NFP Clears the Way for Fed Hike

--- 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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