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.
For the month of September, the Land Down Under is expected to have added 4.4K new jobs, which would be a slight rebound over the 8.8K drop in hiring last August. However, their jobless rate is expected to climb from 5.1% to 5.3% during the same month.
How did the previous reports turn out?
Reviewing the past results of this employment report would reveal that two out of the past six releases came in below consensus and actually showed negative jobs growth.
Another important thing to note is that better-than-expected results tend to get a downward revision the following month. For instance, the 14K increase in hiring reported in July was revised down to just 11.7K later on.
Meanwhile, the jobless rate has been coming either in line with consensus or slightly better than expected for the past nine releases.
How does AUD/USD usually react?
AUD/USD tends to react in correlation with the actual results, which means that stronger-than-expected figures usually trigger a rally while a weaker-than-expected report can result in a selloff. Bear in mind that the rally or selloff tends to get magnified when the employment change figure is accompanied by a corresponding drop or rise in the jobless rate.
Note also that, when there’s a divergence between the employment change figure and the jobless rate, the pair tends to react more to the latter. This was the case for the August jobs report, where the 8.8K decline in hiring was surprisingly accompanied by a drop in Australia’s jobless rate, leading to an AUD/USD rally.
Based on past price action, AUD/USD can move from one inflection point to the next during the actual time of the release. After the initial reaction, the pair tends to trend in one direction for the rest of the Asian session then reverses a part of its move later on.
As you can see, the past couple of releases turned out to be bullish for the Aussie as they both printed upside surprises.
In August, the market reacted to the employment report with a sharp initial rally.
On the other hand, the market’s reaction last month was much more explosive. The report caused AUD/USD to dip down at first, but it ultimately led to a 100-pip strong rally that ended at the 1.0300 handle.
Tips and Tricks
Given the pair’s tendencies, there are two ways we can trade this report:
1) Trade the release – AUD/USD has a habit of consolidating before the report is published, so setting orders above or below the Tokyo session range and riding the initial wave could turn out to be a profitable strategy.
2) Fade the release – One thing you may notice about the event is that the bulk of the market’s reaction tends to occur within the first 15 minutes of the report’s release. So if you’re a contrarian, you might want to consider fading the move at the next major support or resistance level.