AUDUSD: Trading Australia’s Employment Report

By David Song, Currency AnalystMichael Boutros, Currency Strategist

Trading the News: Australia Employment Change

What’s Expected:

Time of release: 0 4 /1 2 /2012 1 :30 GMT, 21 :30 EDT

Primary Pair Impact: AUDUSD

Expected: 6.5K

Previous: -15.4K

DailyFX Forecast: -10.0K to 5.0K

Why Is This Event Important:

Employment in Australia is expected to increase6.5K after contraction 15.4K in February and the rebound in jobgrowth may spark a bullish reaction in the AUDUSD as thedevelopment reinforces an improved outlook for the $1T economy. Asprivate sector activity gradually gathers pace, we may see theReserve Bank of Australia preserve a wait-and-see approachthroughout 2012, but the central bank may keep the door open toease policy further as the slowdown in global trade dampens theprospects for an export-led recovery. According to Credit Suisseovernight index swaps, market participants see a 93% chance for arate cut at the May 1 st meeting, and we may see the downward trendingchannel in the AUDUSD continue to take shape as interest rateexpectations falter.

Recent Economic Developments

The Upside

Release

Expected

Actual

ANZ Job Advertisements (MoM) (MAR)

--

1.0%

NAB Business Confidence (MAR)

--

3

Retail Sales s.a. (MoM) (FEB)

0.2%

0.2%

The Downside

Release

Expected

Actual

AiG Performance of Construction Index (MAR)

--

36.2

Trade Balance (FEB)

1100M

-480M

AiG Performance of Manufacturing Index (MAR)

--

49.5

The rise in business confidence paired with theexpansion in private sector consumption certainly bodes well forthe labor market, and a marked rise in employment may push theAUDUSD back towards the 200-Day SMA at 1.0390 as the developmentdampens speculation for a rate cut. However, the slowdown in globaltrade along with the ongoing slack within the real economy maycontinue to drag on the labor market, and a dismal employmentreport may heighten speculation for a rate cut as the RBA maintainsa dovish tone for monetary policy. In turn, a weaker-than-expectedprint would reinforce our bearish call for the AUDUSD, and weshould see the pair move back towards the 38.2% Fibonacciretracement from the 2010 low to the 2011 high around 0.9930-50 asit carves out a major top in 2012.

Potential Price Targets For The Release

A look at the encompassing structure sees theaussie continuing to trade within the confines of a descendingchannel formation dating back to the February 29 th high with the pair rebounding off key dailysupport at the 61.8% Fibonacci retracement taken from the December15 th advance at 1.0240. This level remains paramountfor the aussie with a break below offering further conviction onour directional bias. Topside resistance stands at the confluenceof the 50% retracement and channel resistance at 1.0360 backed bythe 200-day moving average at 1.0380 and the 100-day moving averageat the 1.04-figure. Note that an RSI breach of trendline resistancedoes suggest that the pair may see a larger correction beforeheading lower.

Our 30min scalp chart shows the aussie tradingwithin the confines of a short-term descending channel formationwith the pair currently trading just below interim resistance atthe 78.6% Fibonacci extension taken form the March 19 th and 27 th crests at 1.0320. A breach here eyes subsequentceilings at 1.0350, the 61.8% extension at 1.0370 and the1.04-figure. Interim support rests at 1.0280 backed by the 100%extension at 1.0255 and 1.0225. A break below this level riskssubstantial losses for the aussie with such a scenario eyingextended targets at the 123.6% extension at 1.0185 and 1.0165.Should the print prompt a bullish response, look to target topsidelevels with a breach above channel resistance negating our interimbias.

How To Trade This Event Risk

Forecast s for a rebound in employment casts a bullishoutlook for the high-yielding currency, and a positive development could set the stage fora long Australian dollar trade as the data raises the prospects fora more robust recovery. Therefore, if the $1T economy adds 6.5Kjobs or more in March, we will need a green, five-minute candlefollowing the release to establish a buy entry on two-lots ofAUDUSD. Once these conditions are met, we will set the initial stopat the nearby swing low or a reasonable distance from the entry,and this risk will generate our first target. The second objectivewill be based on discretion, and we will move the stop on thesecond lot to breakeven once the first trade hits its mark in orderto preserve our gains.

However, the ongoing weakness in t he private sector paired with the slowdown in global trade may drag on hiring, and a dismal employment report could spark a sharp selloff in the exchange rate as it raises the scope for a rate cut. As a result, if the data falls short of market expectations, we will implement the same strategy for a short aussie-dollar trade as the long position laid out above, just in the opposite direction.

Impact that the change in Australia Employment has had on AUD during the last month

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

FEB 2011

03/08/2012 0:30 GMT

5.0K

-15.4K

-13

+72

February 2012 Australia Employment

Australia’s labor market unexpectedly weakened in February, with the $1T economy shedding 15.4K jobs, while the jobless rate advanced to 5.2% from 5.1% in the previous month. Indeed, the dismal labor report pushed the AUDUSD towards 1.0520, but the Australian dollar regained its footing throughout the day to end the trading session at 1.0640.

--- Written by David Song, Currency Analyst andMichael Boutros, Currency Strategist

To contact David, e-mail dsong@dailyfx.com. Followme on Twitter at @DavidJSong

To contact Michael email mboutros@dailyfx.comorfollow him on Twitter @MBForex.

To be added to David's e-mail distribution list,send an e-mail with subject line "Distribution List" todsong@dailyfx.com.

To be added to Michael’s email distributionlist, send an email with subject line “DistributionList” to mboutros@dailyfx.com

Questions? Comments? Join us in the DailyFX Forum

View the Expo Presentation on ‘Trading theNews’ For Additional Resources
DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/trading_news_reports/2012/04/11/AUDUSD_Trading_Australias_Employment_Report.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

More from Currencies

Bitcoin Today: Prices Slip as Broader Crypto Market Struggles to Make Traction

Bitcoin Today: Prices Slip as Broader Crypto Market Struggles to Make Traction

Bitcoin Today: Prices Attempt to Recover From One-Month Lows

Bitcoin Today: Prices Attempt to Recover From One-Month Lows

Cryptocurrency Regulation Is a Must for Long-Term Sustainability, Expert Says

Cryptocurrency Regulation Is a Must for Long-Term Sustainability, Expert Says

These Small Cap Experts Explain Why Crypto Isn't Going Anywhere

These Small Cap Experts Explain Why Crypto Isn't Going Anywhere

Bitcoin Today: Prices Sink to One-Month Low as Bid to $10,000 Falters

Bitcoin Today: Prices Sink to One-Month Low as Bid to $10,000 Falters