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AUD/USD to Eye 2015 Support on Upbeat Australia Employment Report

AUD/USD to Eye 2015 Support on Upbeat Australia Employment Report

David Song, Shuyang Ren,

- Australia Employment to Increase for First Time Since November.

- Jobless Rate to Hold at Annualized 6.0% for Second Consecutive Month.

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Trading the News: Australia Employment Change

A 13.5K rebound in Australia Employment may prop up the Australian dollar and spark a near-term advance in AUD/USD as it provides the Reserve Bank of Australia (RBA) with greater scope to retain its current policy throughout 2016.

What’s Expected:

AUD/USD Australia Employment

Click Here for the DailyFX Calendar

Why Is This Event Important:

Even though Governor Glenn Stevens keeps the door open to further support the real economy, positive developments coming out of the region may encourage the RBA to endorse a wait-and-see approach over the coming months as the central bank sees a ‘moderate’ recovery in the first-quarter of this year.

Expectations: Bullish Argument/Scenario

ReleaseExpectedActual
NAB Business Confidence (FEB)--8
Trade Balance (JAN)-3.200B-2.937B
Gross Domestic Product (YoY) (4Q)2.5%3.0%

Improved confidence accompanied by signs of a stronger-than-expected recovery may foster a marked rebound in job growth, and a positive development may heighten the appeal of the Australia dollar as it dampens bets for a rate-cut.

Risk: Bearish Argument/Scenario

ReleaseExpectedActual
Home Loans (MoM) (JAN)-3.0%-3.9%
Retail Sales (MoM) (JAN)0.4%0.3%
Company Operating Profit (QoQ) (4Q)-1.8%-2.8%

However, the slowdown in private-sector lending paired with the ongoing rebalancing in the real economy may drag on job growth, and another unexpected decline in employment may drag on the exchange rate as it fuels speculation for additional monetary support.

How To Trade This Event Risk(Video)

Bullish AUD Trade: Employment Rebounds 13.5K 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.

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Potential Price Targets For The Release

AUD/USD Daily

AUD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The deviating paths for monetary policy casts a long-term bearish outlook for AUD/USD especially as the RBA keeps the door open to implement lower-borrowing costs, but the near-term uptrend in price may spark another run at the former 2015 support-zone.
  • Interim Resistance: 0.7580 (50% expansion) to 0.7590 (100% expansion)
  • Interim Support: 0.6830 (161.8% expansion) to 0.6860 (61.8% expansion)

Check out the short-term technical levels that matter for AUD/USD heading into the report!

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Impact that Australia Employment Change has had on AUD during the last release

PeriodData ReleasedEstimateActualPips ChangePips Change
JAN 201602/17/2016 00:30 GMT13.0K-7.9K-22-32

January 2016Australia Employment Change

AUD/USD Chart

Australia’s employment unexpectedlyfell another 7.9K in January following a revised 0.9K contracted the month prior. At the same time, the unemployment unexpectedly climbed back to 6.0% from 5.8% during the same period even as the participation rate held steady at 65.2%. As a result, a further slowdown in job growth may put increased pressure on the Reserve Bank of Australia (RBA) to further assist with the rebalancing of the real economy as Governor Glenn Stevens keeps the door open to implement additional rate-cuts. The initial bearish market reactionwas short-lived, with AUD/USD largely consolidating throughout the Asian/Pacific trade as the pair ended the session at 0.7142.

Read More:

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Long Term Cyclical Influence Nears for AUD/USD

Another Big Test Awaits USD/CAD

DailyFX Technical Focus: Nikkei 225 at Resistance

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.

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