– Australia Employment Expected to Increase for Sixth Time in 2014.
– Jobless Rate of 6.3% Would Mark Second-Highest Reading for 2014.
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Trading the News: Australia Employment Change
The AUD/USD may face a larger rebound over the next 24-hours of trade as the employment report is expected to show the $1T economy adding 15.0K jobs in August.
What’s Expected:
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Why Is This Event Important:
A rebound in employment may encourage the Reserve Bank of Australia (RBA) to retain its current policy throughout the remainder of the year, but a further deterioration in the labor market may drag on interest rate expectations as the central bank cuts its growth and inflation forecast.
Expectations: Bullish Argument/Scenario
Release
Expected
Actual
Gross Domestic Product s.a. (QoQ) (2Q)
0.4%
0.5%
Building Approvals (MoM) (JUL)
1.9%
2.5%
Retail Sales (MoM) (JUL)
0.4%
0.4%
The pickup in private sector activity may encourage firms to ramp up on hiring, and a positive employment report may lead the AUD/USD to retrace the decline from earlier this month as it raises the RBA’s scope to normalize monetary policy sooner rather than later.
Risk: Bearish Argument/Scenario
Release
Expected
Actual
NAB Business Confidence (AUG)
—
8
Net Exports of GDP (2Q)
-0.70
0.90
Company Operating Profits (QoQ) (2Q)
-2.0%
-6.9%
However, the downtick in business sentiment along with the weakening outlook for global trade may drag on the labor market, and a dismal print may highlight a bearish outlook for the AUD/USD as it renews bets for a rate cut.
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How To Trade This Event Risk(Video)
Bullish AUD Trade: Employment Climbs 15.0K or Greater
Need green, five-minute candle following the report for a potential long AUD/USD trade
If market reaction favors a long aussie trade, buy AUD/USD with two separate position
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, Unemployment Disappoint
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
Read More:
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Potential Price Targets For The Release
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Chart – Created Using FXCM Marketscope 2.0
Bearish trend in price & RSI favor downside targets; Will look for a lower-high on a near-term correction
Interim Resistance: 0.9280 (78.6% expansion) to 0.9300 (23.6% retracement)
Interim Support: 0.9070 (38.2% retracement) to 0.980 (50.0% retracement)
Impact that Australia Employment Change 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)
JUL 2014
08/07/2014 1:30 GMT
13.2K
-0.3K
-57
-75
July 2014 Australia Employment Change
Employment in Australia contracted 0.3K in July compared to the previous month’s 14.9K increase, while the unemployment rate unexpectedly climbed to an annualized 6.4% from 6.0% in June as discouraged workers returned to the labor force. As the RBA continues to see a ‘moderate’ recovery this year, the ongoing weakness in the labor market may give the central bank little room to maneuver amid the rebalancing in the $1T economy. The lackluster reading dragged on the aussie-dollar, with the AUD/USD dropping 57 pips within an hour and ending the day at 0.9268.
— Written by David Song, Currency Analyst and Shuyang Ren
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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Source: Daily fx
