Trading the Australian Jobs Report

Planning on trading the release of Australia’s employment report? Check out these tips and tricks based on past price action!

What is this report all about?

Australia’s employment change figure shows the change in the number of people who have jobs during the month prior to the release. In other words, this report keeps track of whether jobs were created or lost in that period.

As such, the employment report is considered a leading indicator for spending and overall growth. After all, job creation usually leads to higher consumer spending, which comprises as huge chunk of economic activity.

What is expected for the upcoming release?

For December 2013, Australia is expected to have added 10.3K in jobs, enough to keep the jobless rate steady at 5.8%. This is lower compared to November’s 21.0K in employment gains.

Bear in mind though that, save for the November 2013 data, Australia has been printing bleaker than expected jobs figures for four months in a row. Early employment indicators, such as the ANZ job advertisements report, have also hinted at weaker hiring recently.

How does AUD/USD usually react?

Let’s take a short walk down memory lane to review how the pair behaved during the release of the November and October 2013 data:

audusd_novHiring was much weaker than estimated in October, as the employment change figure came in at 1.1K versus the estimated 10.3K increase. The jobless rate was as expected at 5.7%, but the previous month’s employment change reading had a significant downward revision from 9.1K to 3.3K.

audusd_decAs for the November data, the actual employment change figure was better than expected at 21.0K yet the previous month’s reading was revised from an initially reported 1.1K to -0.7K. Aside from that, the jobless rate ticked up from 5.7% to 5.8%.

How can you trade this report?

Given the pair’s tendencies, there are three things you should pay close attention to when the report is released: expectations for the employment change figure, revisions to the previous month’s reading, and changes in the jobless rate.

Based on the previous reports, it appears that AUD/USD sells off when at least two of these conditions reflect labor market weakness. For instance, a combination of worse than expected employment change results and an uptick in the unemployment rate could result to overall AUD/USD weakness.

If you plan on trading the actual release, take note that the pair usually consolidates hours before the report is printed so a straddle setup could work for a quick news play. Do you plan on trading this release?