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Planning on trading the news this week? Australia’s upcoming jobs release could give you a good opportunity to grab quick pips on Thursday so let’s take a look at what might happen during this economic event.

1. Headline figures could show weakness

For January, the employment change reading could print a negative reading, which would reflect job losses for the month. Analysts are expecting to see a 4.7K decline in hiring, which might bring the unemployment rate up from 6.1% to 6.2%.

In addition, revisions to previous releases are expected and this could play a role in determining the Australian dollar’s forex price action. Take note that these upgrades or downgrades can be pretty significant ones, as labor statisticians are still adjusting to the recent change in the employment survey methodology.

2. Potential strength in underlying data?

Short-term forex traders typically react to the headline figures, but the underlying components could paint a totally different picture of the labor market and dictate longer-term AUD price action.

In particular, the labor force participation rate also generates a lot of attention since this indicates whether or not Australians are feeling more confident about their job prospects. A higher participation rate means that more people are returning to the labor force to resume their job hunt while a declining participation rate indicates that Australians are starting to give up looking for work.

3. Hiring trends have been positive so far

A quick review of past releases shows that the Australian economy has printed stronger than expected results for three out of the last four labor reports. Job advertisements as reported by ANZ have been picking up so far, with the report churning out positive readings for the past eight months.

In terms of global employment trends these days, January seems to have been a pretty good month – at least for the U.S. and Canada. It looks like the commodity price slump hasn’t hit major economies too hard yet, as producers and exporters haven’t announced huge job cuts so far.

4. AUD/USD’s usual forex reaction

Stronger than expected headline figures tend to spark a strong rally for AUD/USD during the Asian trading session while weak data usually results to a sharp selloff. Based on the past releases, the pair isn’t able to sustain this initial reaction, as forex traders book profits once the London session rolls along and an intraday reversal usually takes place.

AUD/USD 15-min Forex Chart
AUD/USD 15-min Forex Chart

The initial reaction to the release tends to last by around a hundred pips before profit-taking takes place. In this previous release on January 15th though, dollar pairs had an unusual kick in volatility towards the end of the London session when the SNB made its surprise announcement.

What’s your game plan for the Australian jobs release this week? Will you attempt to catch the initial move, fade the reaction, or just wait for longer-term trends?