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AUD/USD: Australian Dollar Turns to Jobs Data, RBA Cut Odds

AUD/USD: Australian Dollar Turns to Jobs Data, RBA Cut Odds

Rich Dvorak, Analyst

AUDUSD PRICE AT RISK AHEAD OF JULY AUSTRALIA JOBS REPORT

  • Australian Dollar implied volatility measures skyrocket in anticipation of high-impact event risk posed by the upcoming Australia jobs report
  • AUDUSD & AUDJPY could be at risk if Australia employment numbers disappoint and rekindle RBA rate cut bets
  • Join DailyFX Analyst Daniel Dubrovsky for free live webinar coverage of the Australia Employment Change data release

The Australian Dollar could be at risk of further downside despite surging earlier this week on the back of US-China trade war de-escalation. AUDUSD, AUDJPY & other Aussie currency pairs will likely take cue on their next direction from the release of Australia jobs data slated to cross the wires during Thursday’s trading session at 1:30 GMT.

AUSTRALIA JOBS REPORT – MONTHLY EMPLOYMENT CHANGE

Australia Jobs Report Monthly Chart Historical Data

The monthly employment change is a closely watched economic indicator by the Reserve Bank of Australia (RBA) and the excess slack in Australia’s labor market remains a concern of central bankers. Lingering US-China trade war uncertainty has weighed negatively on global GDP growth and economic activity with Australia being indirectly impacted in particular seeing that China is the country’s largest trading partner.

That said, another uninspiring data point on Australia’s monthly employment change could encourage the RBA to loosen monetary policy further with another interest rate cut – especially considering that RBA Assistant Governor Christopher Kent recently stated how cutting rates is an effective tool in lifting the economy.

RESERVE BANK OF AUSTRALIA INTEREST RATE CUT ODDS

RBA Reserve Bank of Australia Interest Rate Cut Expectations Price Chart

According to the latest overnight swaps pricing, rate traders are chalking up the September RBA meeting interest rate decision to a near 50-50 split between another rate cut and the central bank holding its policy interest rate at the current 1.00% level.

AUSTRALIAN DOLLAR IMPLIED VOLATILITY & TRADING RANGES

Australian Dollar Price Volatility Implied Ahead of July Employment Change Report

Due to the high-impact nature of the monthly Australia jobs report and current market pricing of anticipated RBA interest rate cuts, it is unsurprising that AUDUSD overnight implied volatility surged to 13.21% - its highest reading since May 6. Sentiment-geared AUDJPY is also expected to be volatile during Thursday’s trading session with an overnight implied volatility reading of 16.51% and is its highest reading since May 9.

AUDUSD PRICE CHART: DAILY TIME FRAME (JANUARY 2018 TO AUGUST 2019)

Spot AUDUSD Price Chart Technical Analysis

Judging by AUDUSD overnight implied volatility of 13.21%, spot prices are expected to trade between 0.6700-0.6794 with a 68% statistical probability on Thursday. Spot AUDUSD has so far failed to recover the 0.6800 handle since plunging below this major area of technical confluence earlier this month. A better-than-expected Australia jobs report could bolster spot AUDUSD, but upside could be limited in light of tarnished risk appetite and daunting technical resistance. Looking to the downside, the psychologically-significant 0.6700 handle has potential to provide a degree of buoyancy before AUDUSD bears push for a retest of the currency pair’s year-to-date low of 0.6677.

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

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

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