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AUD/USD to Eye 2015 Low on Dismal Australia Employment Report

AUD/USD to Eye 2015 Low on Dismal Australia Employment Report

David Song, Shuyang Ren,

- Australia Employment to Contract for Fourth-Time in 2015.

- Jobless Rate to Increase to Annualized 5.9% From Lowest Reading Since April 2014.

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

Trading the News: Australia Employment Change

A 10.0K contraction in Australia Employment accompanied by an uptick in the jobless rate may spur fresh monthly lows in AUD/USD as it puts 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:

The RBA may sound more dovish at the February 2 policy meeting should the employment report highlight a marked slowdown in job growth, and Governor Glenn Stevens may keep the door open to implement lower borrowing-costs in order to further assist with the rebalancing of the real economy.

Expectations: Bearish Argument/Scenario

Release

Expected

Actual

AiG Performance of Construction (DEC)

--

46.8

Building Approvals (MoM) (NOV)

-3.0%

-12.7%

AiG Performance of Services (DEC)

--

46.3

The ongoing contraction in service-based activity accompanied by the slowdown in the housing market may drag on job growth, and a dismal employment report may spur a bearish reaction in the Australian dollar as it fuels bets for a further reduction in the RBA’s cash rate.

Risk: Bullish Argument/Scenario

Release

Expected

Actual

Retail Sales (MoM) (NOV)

0.4%

0.4%

Trade Balance (NOV)

-2.985B

-2.906B

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

2.4%

2.5%

Nevertheless, improving demand from home and abroad may encourage Australian firms to boost their labor force, and another unexpected pickup in job growth may keep Governor Glenn Steven and Co. on the sidelines throughout 2016 as the previous rate cuts continue to work their way through the real economy.

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How To Trade This Event Risk(Video)

Bearish AUD Trade: Employment Contracts 10.0+K, Jobless Rises to 5.9% 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 Continues to Beat Market Expectations

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

Potential Price Targets For The Release

AUD/USD Daily

GBP/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Long-term outlook for AUD/USD remains tilted to the downside but, the pair may have marked a failed attempt to test the 2015 low (0.6906) as the Relative Strength Index (RSI) holds above oversold territory and bounces back from 30.
  • DailyFX Speculative Sentiment Index (SSI) shows the retail crowd remains net-long AUD/USD since January 5, but the ratio continues to come off of recent extremes as it narrows to +1.56, with 61% of traders now 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)

NOV 2015

12/10/2015 00:30 GMT

-10.0K

71.4K

+72

+47

October 2015 Australia Employment Change

AUD/USD Chart

The Australian labor market continued to improve in November, with the economy unexpectedly adding another 71.4K jobs following a revised 56.1K expansion the month prior. At the same time, the Unemployment Rate slipped to a 12-month low of 5.8% even as the participation rate unexpectedly climbed to 65.3% from 65.0% in October. Despite the encouraging prints, the Reserve Bank of Australia (RBA) may keep the door open to further insulate the economy as the central bank continues to see below-trend growth over the policy horizon. Despite the better-than-expected print, the Australian Dollar struggled to retain the move above the 0.7300 handle as the pair ended the Asia-Pacific trade at 0.7287.

Read More:

Bearish EUR/USD: Eyeing New 2016 Lows

COT-Large Speculators Flip to Net Long Japanese Yen Position

USD/CAD Technical Analysis: Multiple Major Targets Hit This Morning

Price & Time: NZD/USD: Starting Down or Bullish Backtest?

Avoid the pitfalls of trading by steering clear of classic mistakes. Review these principles in the "Traits of Successful Traders" series.

--- 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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