Forex Trading Guide: Australia’s Jobs Report (September)

G’day, forex mates! The U.K. ain’t the only one releasin’ its jobs report since the Land Down Under is scheduled to print its September jobs report this Thursday as well (October 15, 2:30 am GMT). So, if you haven’t already make sure to mark your forex calendar and read up on this edition of my Forex Trading Guide since there’s a pretty good chance that we’ll be seeing an injection of volatility (and perhaps even a more sustained directional movement).

What’s this report all about?

To the newbie forex traders who are just tuning-in, the Australian Bureau of Statistics (ABS) releases a monthly report on the current state of the Australian labor market. And forex traders usually zoom in on three major labor indicators: (1) the jobless rate, which is the percentage of the total labor force that’s unemployed but actively looking for jobs, (2) the labor force participation rate, which is the percentage of the working-age population who are active in an economy’s labor force, and (3) employment change, which is a measure of the net increase (or decrease) in the number of people employed during the reporting period. Pretty straightforward, right?

Oh, if you want a quick reminder on how to interpret the readings, just keep these in mind:

  • For the jobless rate, lower is better
  • For the labor force participation rate, higher is better
  • For the change in employment, a higher figure is better

What happened last time?

For the August employment report, the jobless rate ticked lower to 6.2% from 6.3%, but most forex traders were already expecting that. What caught most forex traders by surprise was employment change since it saw a net increase of 17.4K jobs, which is significantly better than the 5.2K consensus. Better still, the previous reading saw a slight upgrade from 38.5K to 39.2K. Of the 17.4K new jobs, 11.5K were full-time jobs, which is great since a full-time job usually offers better pay and security when compared to part-time jobs.

The labor force participation rate was a bit of a downer, though, since it ticked lower from 65.1% to 65.0%, which means that the lower jobless rate could possibly be due to leaving the labor force since the report also points out that the number of unemployed people looking for full-time work decreased by 3,500 while the number of people looking for part-time work decreased by 11,000.

What is expected this time?

For the upcoming report, the general consensus among most market analysts and forex traders is that the jobless rate will hold steady at 6.2% while employment change will only be seeing a net increase of 7.2K jobs, which is heaps lower than the previous reading of 17.4K, but an increase is always a good thing, I guess.

Looking at some leading indicators, the Australia and New Zealand Banking Group’s (ANZ) job advertisement survey for September saw a 3.9% increase (1.3% previous), which could potentially mean higher demand for labor, and thus, higher employment levels.

Unfortunately, the Australian Industry Group’s (AIG) manufacturing PMI for September indicated that the employment sub-index slid by 0.6 points to 50.7, which means that employment levels are still expanding, albeit at a slower rate. AIG’s services PMI for September has it worse, however, since the employment sub-index slipped into “mild contraction” at 48.9 (52.5 previous).

Overall, we have mixed signals from our leading indicators, but the consensus seems about right in my book.

How might the Aussie dollar react?

AUD/USD 15-min Forex Chart (Sept 10, 2015)

AUD/USD 15-min Forex Chart (Sept 10, 2015)

Last time, forex traders began loading up on the Aussie when the jobs report was released. And while many forex traders were probably pricing-in the better-than-expected reading for employment change, the follow-through buying didn’t quite make sense since the better-than-expected reading for employment change was still lower than the previous reading and the lower jobless rate could have been due to a downtick in labor force participation rate.

Looking at the other reports that came out during the session, one major economic report that came out almost simultaneously with Australia’s jobs report was China’s CPI reading, which posted a better-than-expected 2.0% increase (1.6% previous).

As a major export destination for Australian commodity products, good data from China tends to boost demand for the Aussie as well, which is probably why the Aussie charged higher across the board even though the jobs report was actually sending a mixed signal. Moreover, the positive data from China triggered a commodity rally during the London forex session, which probably attracted even more Aussie bulls.

Anyhow, for the upcoming report, just keep in mind that forex traders usually have a knee-jerk reaction to the readings, so a better-than-expected reading usually sparks a short-term rally while a poor reading usually triggers a sell-off. Also, the current standing of the actual reading relative to the previous reading usually affects the strength and sustainability of the rally or sell-off.

And while there’s no major, simultaneous report from China that could potentially affect the Aussie’s price action, just remember that commodity prices are always a risk factor given that the Aussie is a commodity dollar and all, so make sure to keep an eye on commodity prices as well.

You can also review my earlier Forex Trading Guides for this event:

August Employment Report
July Employment Report
June Employment Report