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Whattup, forex homies!

When the dust has settled around the FOMC’s statement, then you should pay attention to the next potential market mover – Australia’s jobs data. That’s right, the report is coming up on Thursday at 12:30 am GMT!

Here are bits of info that you might want to know before you trade the event:

What happened last time?

  • January employment change: +16.0K vs. +15.3K expected, +33.5K previous
  • December employment change revised lower from 34.7K to 33.5K
  • Jobless rate slips from 5.6% to 5.5% as expected
  • Labour force participation rate dips from 65.7% to 65.6%

Australia’s labour market made history in January, as it marked its 16th consecutive month of net job creation. And at 12.4535 million, total employment now stands at the highest level on record!

Headline readings also made Aussie bulls giddy. See, a net of 16,000 workers had found jobs, which was more than the 15,000 that markets had expected. Not only that, but the unemployment rate also dipped lower to 5.5%!

It wasn’t all rainbows and unicorns, however. For one thing, it was the 65,900 increase in part-time jobs that pushed the numbers higher while 49,800 employees lost their full-time work. Oh, and wage growth wasn’t so hot either.

Overall the combo of full-time workers losing jobs and lack of wage pressures provide little encouragement for the RBA, which is looking to labour market improvements for inflation pressure.

So while the Aussie found support on the back of strong headline readings, it also easily succumbed to heavier selling pressure that had plagued higher-yielding currencies on the day of the release.

What are market players expecting this time?

  • February employment change: +20.0K vs. +16.0K previous
  • Jobless rate to remain at 5.5%
  • Labour force participation rate to slip further from 65.6% to 65.5%

Do market geeks have good reason to expect an even stronger job growth in February? Let’s take a look at the leading indicators:

The employment sub-index of AIG’s manufacturing index (PMI) reported a 5.7-point jump to 57.8, as businesses are getting more confident over a sustained period of recovery. The report also noted that manufacturers are finding it hard to find skilled workers, which could mean increased wages in the manufacturing sector.

The employment sub-index of AIG’s services index (PSI) reported slower growth, down 4.2 points to 53.9 following a strong growth in January.

Meanwhile, a surge in large-scale infrastructure and government projects pushed the employment sub-index of AIG’s construction index (PCI) to its highest reading in seven months. It also hit its tenth consecutive month of growth, AND recorded higher wages in February. Wowza!

ANZ’s job ads report wasn’t as rosy with its 0.3% decline for the month after a sharp 6.2% increase in January. Still, ads were up by 0.9% in trend terms.

Last but not the least is the NAB business confidence report, which showed business confidence slipping by 2 points. Business conditions hit a record high of +21 points, though, so looks like it’s all good.

What do historicals say?

Looks like the leading indicators are mostly pointing to improvement in February. Unfortunately, previous February releases won’t help us know for sure.

As you can see, analysts tend to overshoot their estimates almost as often as they underestimate them.

There also doesn’t seem to be any seasonal change in terms of employment change, as there have been as many increases as decreases in net employment in the last February readings.

So, how can I trade the report?

Based on the last two releases (see charts below), we can see that Australia’s jobs data CAN affect the Aussie’s price action and even dictate its direction for the rest of the week.

Australia's Jobs Report (January Release)
Australia’s Jobs Report (January Release)
Australia's Jobs Report (February Release)
Australia’s Jobs Report (February Release)

A downside surprise, for example, or another month of overwhelming gains of part-time work over full-time jobs could raise more concerns over the (lack of) inflationary pressure from labour market improvements.

Meanwhile, an upside surprise (especially in full-time employment gains) could provide the Aussie its much needed lovin’ and attract bulls after weakening sharply last week.

Before you place your trading orders, though, you should note that the much-awaited Fed event is scheduled only a few hours before Australia’s job data.

If the FOMC drops some bombshells during the release, then Asian market players could very well shrug off the report and treat the Aussie as any other higher-yielding currency.

If you’re not feelin’ like trading this particular report, or you’re not sure how you’re gonna trade it, then you could always stay in the sidelines.

Just make sure you stay glued to the tube for news that would dictate the Aussie’s intraweek trend!