It’s jobs week for Australia this week! What are traders expecting this time? More importantly, how can markets react to the release?
Labor market reports (Nov. 15, 12:30 am GMT)
Australia’s jobless rate fell to a six-year low in September, which helped attract a lot of bulls to the Aussie.
It’s not all butterflies and rainbows, however. For starters, the economy only added a net of 5,600 new jobs when analysts had expected a 15,200 increase.
The labor force participation rate also dipped from 65.7 to 65.4 and hinted that part of the improvement in jobless rate came from job-seekers giving up their search rather than finding employment.
This week market geeks expect to see the unemployment rate inch back up from 5.0% to 5.1%. However, they also expect a net addition of 20,300 jobs after last month’s 5,600 reading.
I don’t see other top-tier reports scheduled around the time of the release, so it’s likely that the event will dictate the Aussie’s direction until a new catalyst comes along.
Dollar and risk sentiment
Much like the Kiwi, the high-yielding Aussie can once again take cues from overall risk sentiment and the Greenback’s price action.
This week is relatively light in terms of data releases, so investors can go back to pricing in (worrying?) about global concerns such as the U.S.-China trade war, Brexit, and the impact of higher interest rates on the equities markets.
Watch out for headlines that might affect high-yielding currencies like the Aussie!
Last Week’s Price Review
The Aussie will soon be marking its second week of net wins since the Aussie is currently on track to closing out the week in second place (as of 7:00 am GMT).
And the Aussie had a good run this week thanks to the prevalence of risk appetite, the Greenback’s weakness during the first half of the week, and China’s positive trade report.
The week started with a brief bout of risk aversion in Asia and gold prices tumbled to boot, so the Aussie started the week on a weak footing.
However, risk appetite got revived during Monday’s London session, so the Aussie began to attract buyers.
The Greenback also began turning broadly lower during Monday’s U.S. session because of uncertainty surrounding the U.S. midterm elections, which very likely helped to keep the Aussie supported.
Risk aversion would return on Tuesday, but the Aussie just kept in soldiering on. Gold was in recovery mode at the time, but it’s more likely that the Aussie was still feeding off the Greenback’s weakness since gold prices went back down later on Tuesday, but the Aussie only grudgingly tracked gold prices lower.
It’s also probable that demand for the Aussie may have been fueled by the RBA statement on Tuesday since the RBA said that it upgraded its GDP growth forecast and hinted that it may have also upgraded its CPI forecast, which open the doors for a possible rate hike.
At any rate, the Greenback continued to take hits on Wednesday since there were signs that the Democrats would take control of the U.S. House of Representatives.
And we now know that the Democrats were able to secure the needed 218 seats to take control of the House, which gave the Greenback a bearish kick while pushing the Aussie higher.
The Greenback would finally regain its footing during Wednesday’s U.S. session. Gold prices were also turning lower again, but the Aussie remained resilient on most pairs, likely because risk appetite got revived.
AUD bulls would renew their offensive when Thursday’s Asian session rolled around. And the apparent catalyst was China’s better-than-expected trade report.
Bulls would run out of steam during Thursday’s London session, though, probably because risk aversion returned.
Risk aversion then persisted until Friday’s Asian session. And looking at price action, it also looks like the Aussie was hit by selling pressure after the RBA released its Statement on Monetary Policy.
Sure, the RBA upgraded its growth and CPI forecasts, but the RBA already spilled the beans back on Tuesday. Also (and despite the upgrades), the RBA repeated its mantra that:
“[H]igher interest rates are likely to be appropriate at some point. However, given the expected gradual nature of that progress, the Board does not see a strong case to adjust the cash rate in the near term.”