Australian Employment Data: Implications for the AUDUSD

Summary:
• Australian Employment change data are due for release at 12.30am GMT on Thursday. Here are the implications for the AUDUSD and the RBA's monetary policy.

At 12.30am GMT, the Australian Employment Change and Unemployment rate data will be released to the public. The consensus figures are 16.2K jobs added, and for unemployment rate to remain steady at 5.2%.

The consensus figure will represent only a marginal improvement in job additions from the previous month’s figure, which is reflective of the pessimistic view on employment and wage growth expressed by the Reserve Bank of Australia (RBA) in last Friday’s monetary policy statement.

The labour market data are being watched closely as these will provide added clarity on whether the RBA will cut rates going forward. Presently, there is only a 10% chance of a rate cut in December, with 2020 looking more likely as the year that more rate adjustments will be made. The quarterly wage price index released this morning showed a static figure of 0.5%: same as last month and also matched the market consensus figure.

The RBA remains pessimistic about wage and inflation prospects, which increases chances of future rate cuts to increase hiring and place upward pressure on wages.

Trade Playbook on AUDUSD

The deviation in employment change required for the trading opportunity is 1.5K. Therefore, an employment change of 17.7K or higher, with a lower or static unemployment rate, is good for the AUDUSD and could arrest the long-term slide of this currency. The Aussie Dollar has been in need of some good news, especially as Trump’s speech did not provide the magic that was needed for the commodity currency which is heavily trade-reliant with China.

Hiring of less than 14.7K with a higher or static unemployment rate could be bad for the AUDUSD. This scenario increases the chances of RBA rate action in the near-term.

Initial upside target lies at 0.68848, site of recent highs on Sept 13 and October 24. If tomorrow’s data favours the AUD, a strong bounce from intraday support at 0.6815 is likely.

On the flip side disappointing employment data could prompt a break of intraday resistance, which could open the door for further downside on the AUDUSD to recent lows at 0.67108.