Australia is gearing up to release its jobs data for March later this week, which means that it’s time to check out my Forex Trading Guide for this event. Let’s go through our usual routine, shall we?
What is this report all about?
As you’ve probably learned in our School of Pipsology section on Fundamental Analysis, employment reports are usually a big deal for an economy since these provide clues on how growth figures might fare. Improving labor conditions tend to boost consumer confidence, which supports spending and is good for businesses. On the other hand, people generally keep their hands in their pockets when the jobs situation is weak.
Australia has two major components to its jobs release, and these are the employment change reading and the unemployment rate. The former measures the change in the number of employed people from one month to the next, making it an indicator of job creation, while the latter shows the percentage of unemployed folks relative to the labor force.
How did the previous releases turn out?
Australia’s past two jobs reports weren’t so impressive, as the January reading fell short of expectations while the February figure simply came in line with consensus. In fact, the January report actually saw a downward revision from -12.2K to -14.6K while underlying data from the February jobs release hinted at further weakness in hiring.
As I’ve discussed in my latest Monthly Economic Review for Australia, the labor force participation rate has declined from 64.8% to 64.6% last month. This means that a good number of Australians have dropped out of the labor force and given up looking for work – something that usually happens when people aren’t seeing a lot of opportunities in the job market.
What is expected this time?
For the month of March, forex market analysts are expecting to see a 14.9K increase in employment, which might be enough to keep Australia’s jobless rate steady at 6.3%. Leading indicators haven’t been so upbeat, as the ANZ job advertisements report chalked up a sharp 1.4% decline for March and confirmed that companies have scaled back their hiring efforts lately.
How might AUD/USD react?
Given the downturn in hiring trends and hints of further weakness, forex traders appear to be setting the bar pretty low for this upcoming jobs release. Another disappointing reading could be enough to trigger an Aussie selloff, although a small upside surprise could lead to a decent pop higher for AUD/USD.
If you’ve been keeping tabs on the pair’s forex reaction to previous releases, you’d know that it has a tendency to make a reversal during the latter trading sessions. If you’re looking for short-term trades, you could try to catch the initial reaction or fade the move later on. But if you’re more of a swing trader, make sure you review the underlying components of the report to get a clearer picture of the jobs situation before deciding on your longer-term forex bias!