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AUD/USD to Extend 2017 rally on Upbeat Australia Employment Report

AUD/USD to Extend 2017 rally on Upbeat Australia Employment Report

David Song, Strategist

- Australia Employment to Increase for Fourth Consecutive Month.

- Jobless Rate to Hold Steady at Annualized 5.8%, Participation Rate at 64.7%.

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

Trading the News: Australia Employment Change

AUD/USD may extend the advance from earlier this week and target fresh 2017 over the next 24-hours of trade as Australia is expected to add another 10.0K jobs in January.

What’s Expected:

DailyFX Calendar

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Why Is This Event Important:

A further improvement in labor market dynamics may heighten the appeal of the Australia dollar as it encourages the Reserve Bank of Australia (RBA) to adopt an improved outlook for the region, and Governor Philip Lowe may show a greater willingness to gradually move away from the easing-cycle as ‘a return to reasonable growth is expected in the December quarter’ following the economic contraction during the three-months through September. In turn, signs of stronger growth may push the RBA to adopt a hawkish tone over the coming months, but the central bank appears to be in no rush to remove the record-low interest rate as ‘subdued growth in labour costs means that inflation is expected to remain low for some time.’

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

NAB Business Confidence (JAN)

--

10

Trade Balance (DEC)

A$2.000B

A$3.511B

Skilled Vacancies (MoM) (DEC)

--

0.2%

The record trade surplus accompanied by the pickup in business sentiment may generate another better-than-expected employment report, and a positive development may spark a bullish reaction in the Australian dollar as it boosts the outlook for growth and inflation.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Retail Sales (MoM) (DEC)

0.3%

-0.1%

Building Approvals (YoY) (DEC)

-10.8%

-11.4%

Gross Domestic Product s.a. (QoQ) (3Q)

-0.1%

-0.5%

However, easing consumption along with the slowdown in building activity may drag on job growth, and a dismal development may undermine the 2017 rally in AUD/USD as it puts pressure on the RBA to further support the real economy.

For More Updates, Join DailyFX Currency Analyst David Song for LIVE Analysis!

How To Trade This Event Risk(Video)

Bullish AUD Trade: Employment Climbs 10.0K or Greater

  • Need green, five-minute candle following the data print for a long AUD/USD trade.
  • If market reaction favors a long 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: Australia Job Growth Disappoints

  • 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.

If you’re looking for trading ideas, check out our Trading Guides.

Potential Price Targets For The Release

AUD/USD Daily

AUD/USD Daily Chart

Chart - Created Using Trading View

  • AUD/USD stands at risk of extending the advance from earlier this year as it clears the monthly opening range for February, but the Relative Strength Index (RSI) continues to deviate from price as the oscillator struggles to push into overbought territory; will keep a close eye on the broad range from the second-half of 2016 as the near-term rally appears to be getting exhausted, with near-term support comes in around 0.7590 (100% expansion) to 0.7600 (23.6% retracement).
  • Interim Resistance: 0.7730 (61.8% retracement) to 0.7770 (61.8% expansion)
  • Interim Support: 0.7150 (161.8% expansion) to 0.7180 (61.8% retracement)

Check out the short-term technical levels that matter for AUD/USDheading into the release!

Impact Australia Employment report has had on AUD/USD during the release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

DEC 2016

01/18/2017 0:30 GMT

10.0K

13.5K

-14

+44

December 2016 Australia Employment

AUD/USD 5-Minute

AUD/USD Chart

Australia added another 13.5K jobs in December following a 38.3K expansion the month prior, while the jobless rate unexpectedly climbed to an annualized 5.8% from 5.7% during the same period amid an uptick in the Labor Force Participation Rate. With discouraged workers returning to the labor force, a deeper look at the report showed full-time positions increased 9.3K in December, while part-time employment advanced 4.2K. The better-than-expected print failed to keep AUD/USD above the 0.7500 handle as the pair struggled to preserve the sharp advance from earlier in the week, but the move was short-lived, with the aussie-dollar closing the day at 0.7558.

Read More:

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S&P 500: Testing Bottom-side of Familiar Trend-line

Crude Oil Price Forecast: Possibly The Most Encouraging Move of 2017

Gold Prices Vulnerable into February Open- Outlook Constructive Above 1200

--- 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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