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Recovery in Australia Employment to Encourage AUD/USD Rebound

Recovery in Australia Employment to Encourage AUD/USD Rebound

David Song, Strategist

- Australia Employment to Increase for First Time Since July.

- Jobless Projected to Uptick Along With the Labor Force Participation Rate

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

Trading the News: Australia Employment Change

A 15.0K rebound in Australia employment accompanied by a pickup in the labor force participation rate may generate a near-term rebound in AUD/USD as the data prints foster an improved outlook for growth and inflation.

What’s Expected:

DailyFX Calendar

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Why Is This Event Important:

Signs of stronger job growth may encourage the Reserve Bank of Australia (RBA) to carry the current policy into 2017 as ‘members observed that some indicators of domestic inflation cost pressures, such as growth in the wage price index, had stabilised, albeit at low levels, and that underlying inflation was expected to return to more normal levels over time.’ In turn, Governor Philip Lowe and Co. may largely endorse a wait-and-see approach in the year ahead, but another dismal employment report may put pressure on the RBA to further insulate the real economy as ‘members observed that there was uncertainty about the degree of spare capacity in the labour market and how this might ultimately affect inflationary pressures.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

ANZ Job Advertisements (MoM) (OCT)

--

1.0%

AiG Performance of Manufacturing Index (OCT)

--

50.9

NAB Business Confidence (3Q)

--

5

Increased outputs paired with the uptick in business confidence may spur a meaningful rebound in Australia employment, and an upbeat employment report may trigger a bullish reaction in AUD/USD as it boosts the economic outlook for the region.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Retail Sales ex. Inflation (QoQ) (3Q)

5.5%

5.4%

Building Approvals (MoM) (SEP)

-3.0%

-8.7%

Private Sector Credit (YoY) (SEP)

5.5%

5.4%

However, the slowdown in private-sector consumption may lead Australian firms to scale back on hiring, and a dismal development may push AUD/USD back towards the September low (0.7442).

How To Trade This Event Risk(Video)

Bullish AUD Trade: Australia Employment Rebounds 15.0K or Greater

  • Need green, five-minute candle following the release 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: Job Growth Continues to Disappoint

  • Need red, five-minute candle to consider a short aussie position.
  • Carry out the same setup as the bullish AUD trade, just in the opposite direction.

Potential Price Targets For The Release

AUD/USD Daily

AUD/USD Daily Chart

Chart - Created Using Trading View

  • AUD/USD stands at risk of further losses as it fails to preserve the upward trend from earlier this year, and the recent developments suggest a larger shift in market behavior could be underway as the Relative Strength Index (RSI) highlights a similar dynamic; may see the 2016 advance continue to unravel as the pair appears to have marked a failed test of the April high (0.7835).
  • Interim Resistance: 0.7835(2016 high) to 0.7860 (61.8% expansion)
  • Interim Support: 0.7442 (September low) to 0.7450 (38.2% retracement)

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

Impact that theAustralia Employment report had on AUD/USD during the last release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

SEP

2016

10/20/2016 0:30 GMT

+15.0K

-9.8K

-31

-105

September 2016 Australia Employment Change

AUD/USD 5-Minute Chart

AUD/USD Chart

The Australian economy unexpectedly shed another 9.8K jobs in September following a 8.6K contraction the month prior, while the jobless rate narrowed to an annualized 5.6% from a revised 5.7% as the Participation Rate narrowed to 64.5% from 64.7% per annum during the same period. A deeper look at the report showed full-time positions slumped 53.0K following a 10.1K rise in August, while part-time jobs advanced 43.2K after slipping a revised 18.6K. The Australian dollar traded lower following the dismal print, with AUD/USD extending the losses throughout the day as the pair closed at 0.7623.

Get our top trading opportunities of 2016 HERE

Read More:

US Dollar Whiplash Ends with a Trump Bump

GBP/JPY Technical Analysis: New Trend in Play after 800-Pip, 3-Day Romp

USD/CAD Technical Analysis: Pending Trade Talks & U.S. Inflation Weakens CAD

S&P 500 - Bears Got Trumpled, Short-term Trading Levels Noted

--- 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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