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AUD/USD to Pare Losses on Strong Australia Employment Report

AUD/USD to Pare Losses on Strong Australia Employment Report

2016-08-17 21:00:00
David Song, Strategist
Share:

- Australia Employment to Increase for Third-Consecutive Month.

- Unemployment Rate Hold at Annualized 5.8% for Second Month.

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

Trading the News: Australia Employment

Another 10.0K expansion in Australia Employment may generate a near-term rebound in AUD/USD as a further improvement in the labor market raises the Reserve Bank of Australia’s (RBA) scope to retain the current policy at the interest-rate decision on September 6.

What’s Expected:

DailyFX Calendar

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Why Is This Event Important:

With Governor Glenn Stevens scheduled to depart from the central bank next month, the RBA may largely endorse a wait-and-see approach for monetary policy, and AUD/USD may stands at risk of extending the advance from earlier this year especially as the Federal Open Market Committee (FOMC) delays its normalize cycle.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

HIA New Home Sales (MoM) (JUN)

--

8.2%

AiG Performance of Services (JUL)

--

53.9

AiG Performance of Manufacturing (JUL)

--

56.4

The ongoing expansion in the housing market coupled with the pickup in business sentiment may encourage a strong employment report, and a marked pickup in Australia job growth may trigger a bullish reaction in AUD/USD as market participants scale back bets for lower borrowing-costs.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Retail Sales (MoM) (JUN)

0.3%

0.1%

Trade Balance (JUN)

-2.000B

-3.195B

Private Sector Credit (YoY) (JUN)

6.5%

6.2%

However, waning demand from home and abroad may push Australian firms to scale back on hiring, and a dismal development may trigger a larger pullback in the aussie-dollar as it drags on interest-rate expectations.

How To Trade This Event Risk(Video)

Bullish AUD Trade: Australia Adds 10.0K Jobs or Greater

  • Need green, five-minute candle following the print for a long AUD/USD trade.
  • If market reaction favors a bullish aussie position, buy AUD/USD with two separate lots.
  • 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: 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 the opposite direction.

Potential Price Targets For The Release

AUD/USD Daily

AUD/USD Daily Chart
  • Will retain a constructive view for AUD/USD as prices and the Relative Strength Index (RSI) preserve the bullish formations carried over from late-May, with a closing price above 0.7740 (78.6% expansion) raising the risk for run a the 2016 high (0.7834).
  • 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)

JUN 2016

07/14/2016 01:30 GMT

10.0K

7.9K

+27

+28

June 2016 Australia Employment

AUD/USD 5-Minute Chart

AUD/USD Chart

The Australian economy added another 7.9K jobs in June following a revised 19.2K expansion the month prior, while the jobless rate advanced to an annualized 5.8% from 5.7% as the Participation Rate unexpectedly climbed to 64.9% from 64.8% during the same period. A deeper look at the report showed the job gains were led by a 38.4K rise in full-time employment, while part-time positions narrowed 30.6K during the same period after rising a revised 16.6K in May. The Australian dollar gained ground following the improvement in labor-market dynamics, with AUD/USD coming off of 0.7598 to end the day at 0.7630.

Get our top trading opportunities of 2016 HERE

Read More:

USD/CAD Technical Analysis: Macro Now Favoring a Breakdown?

Gold Prices Wedging into Consolidation Near Resistance

USDOLLAR Short Term Technical Update

S&P 500: Notches New Record High, Short-term Techs in Focus

--- 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.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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