Trading Guide: Australia’s Jobs Report

Tomorrow at 1:30 am GMT the Land Down Under will publish its employment numbers. Analysts are expecting to see a net number of 10,000 workers who have found jobs for the month of August, up from the 10,200 net decrease in July. Interestingly, market geeks also expect the unemployment rate to inch higher from 5.7% to 5.8%.

The weak jobless rate estimate isn’t surprising considering that the RBA had already hinted in its last monetary policy decision that it’s expecting weak hiring conditions. This is in line with their short-term estimates of below-average economic growth.

Even business owners themselves aren’t expecting employment conditions to brighten anytime soon. Although yesterday’s NAB business confidence numbers showed optimism, the report’s employment component actually dropped to its lowest since 2009. Not only that, the data also revealed expectations that the jobless rate will exceed 6% by the end of the year!

Before we figure out how we can make pips off this event, let’s first take a look at how AUD/USD reacted to the previous releases. As you can see from the charts below, the pair makes an immediate fundamental reaction to the actual release but tends to reverse the initial move for the rest of the day.

July 2013 (9.3K vs. 0.3K)

AUD/USD Chart

In July, Australia printed a stronger than expected jobs report and AUD/USD jumped to the .9300 area initially. However, the pair was unable to sustain its rally as it soon tumbled down to the .9000 levels over the next hours.

August (-10.2K vs. 6.2K)

AUD/USD Chart

In August, Australia released a weaker than expected employment change reading, and pushed AUD/USD briefly below the .9000 mark. The pair quickly recovered though, as it edged back to the .9200 handle in the next couple of days.

Based on the previous price action, it seems that we might be better off waiting for a reversal from the initial reaction to the Australian jobs report. As always, also watch out for any market events that could cause a shift in sentiment for the rest of the trading sessions, such as the upcoming U.S. initial jobless claims release and Draghi‘s speech. Keep an eye out for potential bounces from major psychological levels as well!