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

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- Australia Employment to Increase for Fourth Consecutive Month.

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

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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:

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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: B ullish 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 : B earish 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.

B earish 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

Chart - Cre ated 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/USD heading 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.

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--- Written by David Song, Currency Analyst

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

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

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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