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AUDUSD RSI Approaches Oversold Zone Ahead of Australia Employment

AUDUSD RSI Approaches Oversold Zone Ahead of Australia Employment

2019-05-16 00:00:00
David Song, Currency Strategist
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Trading the News: Australia Employment Change

Updates to Australia’s Employment Report may do little to influence the near-term outlook for AUD/USD as the economy is expected to add a mere 15.0K jobs in April.

Image of DailyFX economic calendar

Signs of limited job growth may sway the outlook for monetary policy as the Reserve Bank of Australia (RBA) warns that ‘a further improvement in the labour market was likely to be needed for inflation to be consistent with the target,’ and the central bank may adopt a more dovish tone at the next meeting on June 4 as ‘the inflation data for the March quarter were noticeably lower than expected.’ In turn, a print of 15.0K or lower may produce headwinds for the Australian dollar as it fuels bets for an imminent RBA rate-cut, and Governor Philip Lowe & Co. may continue to change their tune over the coming months especially as the U.S. and China, Australia’s largest trading partner, struggle to reach a trade deal.

At the same time, an above-forecast print for Australia Employment may trigger a bullish reaction in AUD/USD as it encourages the RBA to retain a wait-and-see approach for monetary policy. Sign up and join DailyFX Junior Currency Analyst Daniel Dubrovsky LIVEto cover the fresh updates to Australia’s employment report.

Impact that the Australia Employment report had on AUD/USD during the last print

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

MAR

2019

04/18/2019 01:30:00 GMT

15.0K

25.7K

+11

-17

March 2019 Australia Employment Change

AUD/USD 5-Minute Chart

Image of audusd 5-minute chart

Employment in Australia increased 25.7K during March after expanding a revised 10.7K the month prior, while the jobless rate climbed to 5.0% from 4.9% during the same period as the Participation Rate advanced to 65.7% from 65.6%. The pickup was led by a 48.3K rise in full-time positions, while part-time jobs narrowed 22.6K after rising a revised 12.4K in February.

Nevertheless, the initial reaction to the better-than-expected employment report was short-lived, with AUD/USD pulling back ahead of the 0.7200 handle to close the day at 0.7150. Learn more with the DailyFX Advanced Guide for Trading the News.

AUD/USD Rate Daily Chart

Image of audusd daily chart

  • Keep in mind, the AUD/USD rebound following the currency market flash-crash has been capped by the 200-Day SMA (0.7153), with the exchange rate marking another failed attempt to break/close above the moving average in April.
  • With that said, AUD/USD stands at risk of giving back the rebound from the 2019-low (0.6745) as the wedge/triangle formation in both price and the Relative Strength Index (RSI) unravels, with the break/close below the 0.6950 (61.8% expansion) area opening up the Fibonacci overlap around 0.6850 (78.6% expansion) to 0.6880 (23.6% retracement).
  • Next downside hurdle comes in around 0.6730 (100% expansion), but will need to keep a close eye on the RSI as the oscillator approaches oversold territory, with a break below 30 raising the risk for a further decline in the exchange rate as the bearish momentum gathers pace.

Additional Trading Resources

New to the currency market? Want a better understanding of the different approaches for trading? Start by downloading and reviewing the DailyFX Beginners Guide.

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader series on how to effectively use leverage along with other best practices that any trader can follow.

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

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

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