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AUD/USD to Pare Losses on Upbeat Australia Employment Report

AUD/USD to Pare Losses on Upbeat Australia Employment Report

2016-05-18 22:00:00
David Song, Strategist
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- Australia Employment to Increase for Second Consecutive Month.

- Jobless Rate to Widen for First Time Since January.

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Trading the News: Australia Employment Change

Even though Australia’s jobless rate is expected to widen to an annualized 5.8% in April, a pickup in the labor force participation rate paired with another 12.0K expansion in employment may generate a near-term rebound in AUD/USD as it dampens bets for additional monetary support.

What’s Expected:

DailyFX Calendar

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Why Is This Event Important:

After lowering the Official Cash Rate (OCR) to a fresh record-low of 1.75% earlier this month, the Reserve Bank of Australia (RBA) may revert back to a wait-and-see approach at the June 7 policy meeting as the rate-cut works its way through the real economy.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Retail Sales (MoM) (MAR)

0.3%

0.4%

Trade Balance (MAR)

-2.900B

-2.163B

Building Approvals (MoM) (MAR)

-2.0%

3.7%

Improved demand from home and abroad accompanied by the ongoing expansion in building activity may encourage Australian firms to boost their labor force, and a positive development may spur a bullish reaction in AUD/USD as market participants scale back bets for lower borrowing-costs.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

ANZ Job Advertisements (MoM) (APR)

--

-0.8%

NAB Business Confidence (APR)

--

5

Private Sector Credit (MoM) (MAR)

0.5%

0.4%

However, waning business confidence paired with the slowdown private lending may drag on hiring, and a dismal employment report may fuel bets for another RBA rate-cut as Governor Glenn Stevens largely retains a cautious outlook for the region.

How To Trade This Event Risk(Video)

Bullish AUD Trade: Australia Employment Expands 12.0K 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: Employment Report Disappoints

  • Need red, five-minute candle to consider a short AUD/USD position.
  • Carry out the same setup as the bullish aussie trade, just 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 remains at risk of giving back the advance from earlier this year as it fails to preserve the upward trend carried over from January, while the Relative Strength Index (RSI) retains the bearish formation from March.
  • Key Resistance: 0.7848 (June 2015 high) to 0.7860 (61.8% expansion)
  • Key Support: 0.6826 (2016 low) to 0.6830 (161.8% expansion)

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

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

Impact that the Australia Employment report 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)

MAR 2016

04/14/2016 01:30 GMT

17.0K

26.1K

+15

+61

April 2016Australia Employment Change

AUD/USD 5-Minute Chart

AUD/USD Chart

The Australian economy added 26.1K jobs in March after contracting a revised 0.7K the month prior, while the jobless rate unexpectedly narrowed to an annualized 5.7% from 5.8% amid forecasts for a 5.9% print. The pickup in job growth was led by a 34.9K increase in part-time positions, which was offset by an 8.8K decline in full-time employment. Despite the ongoing improvement in the labor market, the Reserve Bank of Australia (RBA) may take additional steps to further assist with the rebalancing of the real economy amid the weakening outlook for global growth. Despite the limited market reaction, AUD/USD gained ground throughout the Asia/Pacific trade, with the pair ending the day at 0.7692.

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Read More:

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USD/CAD Technical Analysis: Time For Bulls To Prove Their Worth

--- Written by David Song, Currency Analyst

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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