Forex Trading Guide: Australian Employment Report

It’s time for another edition of my Forex Trading Guide! For today, let’s take a look at the Australian jobs release and how we can make pips off this economic event.

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 happened last time?

The employment change report for May showed a 4,800 decline in hiring when analysts were expecting to see a 10,300 gain. To top it off, the April figure was revised down from the initially reported 14,200 increase in employment to just 10,300.

Despite that, the jobless rate managed to hold steady at 5.8% instead of rising to the estimated 5.9% figure. However, this was mostly a result of a worsening participation rate, which fell 64.7% to 64.6%. This indicates that some Australians may be leaving the labor force and giving up looking for full-time work.

What is expected?

For the month of June, Australia is expecting to see a rebound in hiring to the tune of 12,300. However, the jobless rate is projected to rise from 5.8% to 5.9%, pending any changes in the participation rate.

How might AUD/USD react?

The Australian dollar typically rallies when the results are stronger than expected or sells off when the actual figures come in below expectations. A quick look at the reaction to the previous release reveals that the initial reaction is often reversed in the latter trading sessions.

AUD/USD 15-min Forex Chart

AUD/USD 15-min Forex Chart

Check out the pair’s reaction to past jobs releases:

February and March 2014 Employment Data

December 2013 and January 2014 Employment Data

What’s interesting about post-jobs release price action is that AUD/USD typically has a huge initial reaction but fails to follow through. With that, you might want to consider fading the release in the London and New York trading sessions.

If trading the news ain’t your cup of tea, then there’s absolutely nothing wrong about sitting on the sidelines! Just make sure you keep tabs on the actual data, as this might help you determine your fundamental bias for the Australian dollar later on.