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Strong Australia Employment Report to Fuel AUD/USD Rebound

Strong Australia Employment Report to Fuel AUD/USD Rebound

2016-02-17 21:25:00
David Song, Shuyang Ren,
Share:

- Australia Employment to Rebound 13.0K in January.

- Jobless Rate to Hold at Annualized 5.8%- Lowest Since April 2014.

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

Trading the News: Australia Employment Change

A 13.0K rebound in Australia Employment accompanied by a pickup in the Labor Participation Rate may boost the appeal of the aussie and spark a near-term advance in AUD/USD as it dampens bets for additional monetary support.

What’s Expected:

Strong Australia Employment Report to Fuel AUD/USD Rebound

Click Here for the DailyFX Calendar

Why Is This Event Important:

Even though the Reserve Bank of Australia (RBA) keeps the door open to implement lower borrowing-costs, signs of a strengthening labor market may encourage Governor Glenn Stevens to endorse a wait-and-see approach at the March 1 interest rate decision as the record-low interest rate continues to feed through the real economy.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

HIA New Home Sales (MoM) (DEC)

--

6.0%

Building Approvals (MoM) (DEC)

4.5%

9.2%

Skilled Vacancies (MoM) (DEC)

--

0.4%

The resilience in the housing market may encourage a meaningful rebound in job growth, and a positive development may drive AUD/USD back towards the monthly high (0.7242) as market participants scale back bets for an RBA rate-cut.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

NAB Business Confidence (JAN)

--

2

Retail Sales (MoM) (DEC)

0.4%

0.0%

Trade Balance (DEC)

-2.450B

-3.535B

Nevertheless, waning confidence accompanied by slowing demand from home and abroad may drag on the labor market, and signs of a slower recovery may cap the near-term rebound in the exchange rate as it fuels bets for additional monetary support.

How To Trade This Event Risk(Video)

Bullish AUD Trade: Employment Rebounds 13.0K or Greater

  • Need green, five-minute candle following the report for a potential long AUD/USD trade.
  • If market reaction favors a bullish 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 Labor Report Fails to Meet 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 reverse.

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

Potential Price Targets For The Release

AUD/USD Daily

AUD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Long-term outlook for AUD/USD remains tilted to the downside as the pair retains the downward trend from August, but a bullish reaction to Australia’s Employment report may spark a run at the monthly high (0.7242) as it boosts interest-rate expectations.
  • 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)

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

AUD/USD SSI
  • The DailyFX Speculative Sentiment Index (SSI) shows increased volatility in retail positioning, with the FX crowd flipping back net-short AUD/USD earlier this morning.
  • With short-positions 41.4% higher from yesterday, the ratio has slipped to -1.33, with, with 43% of traders now long.

Why and how do we use the SSI in trading? View our video and download the free indicator here

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)

DEC 2015

01/14/2016 00:30 GMT

-10.0K

-1.0K

-1

+29

December 2015Australia Employment Change

AUD/USD Chart

Australia’s labor market shed 1.0K jobs in December after expanding a revised 74.5K the month prior. Nevertheless, the unemployment held steady at an annualized 5.8% even as the participation rate unexpectedly narrowed to 65.1% from 65.3% in November. Despite the recent weakness, the Reserve Bank of Australia (RBA) may largely endorse a wait-and-see approach throughout the first-half of 2016 as the employment report continues to beat market expectations. The initial market reaction was short-lived, with AUD/UAD largely consolidating throughout the Asia-Pacific trade to end the session at 0.6959.

Read More:

AUDUSD Opening Range Break Pending Ahead of Aussie Employment Data

USD/CAD Technical Analysis: CAD Bull’s Day In The Sun(Levels)

GBP/USD Breaks Down on Weak U.K. Core CPI; Retail FX Still Net-Long

EUR/USD – Breakout Hangs in the Balance

Get our top trading opportunities of 2016 HERE

--- 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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