AUD/USD: Trading the Australian jobs Aug 2011

Australia releases its employment figures at turbulent times for its currency. This all-important figure always rocks the markets. The low expectations can set the stage for a surprise. Here are the details, and 5 possible outcomes for AUD/USD.

Published on Thursday at 1:30 GMT.

Indicator Background

After many months of strong job gains and surprising results, the recent months have been quite shaky in the Australian job market. The contraction in the economy and especially in the housing sector, have taken their toll on job gains.

June saw a nice rise in jobs, 23,400, but it didn’t manage to cover the losses of the previous two months. All in all, the job losses are still mild.

This is reflected in the very stable unemployment rate: 4.9% for four straight months. No change is expected is expected there, and even a small change will still not take the limelight from the main figure: employment change.

A moderate gain of 10,000 jobs is expected now given the shaky nature of the economy. Any move will be closely watched: the RBA is also looking for a direction regarding interest rates: it still has the options open for both a rate cut and a rate hike in 2011.

Sentiment and Levels

The Aussie experienced a severe plunge below parity on the turmoil that followed the credit downgrade of the US. It did manage to stabilize at higher ground following Bernanke’s pledge for low interest rates in the next two years. All in all, the picture is now balanced and trend is neutral and relatively stable.

Technical levels from top to bottom: 1.0580, 1.05, 1.0440, 1.0390, 1.0314, 1.0254, 1.02, 1.0080, 1.0000, 0.9940, 0.98.

5 Scenarios

1. Within expectations: +1K to +15K: In this scenario, AUD/USD is likely to shake, but remain in range, not breaking any levels.
2. Above expectations: +16K to +25K: A rise above expectations but not too far from last month’s levels is likely to provide fuel for the Aussie’s recovery, and could send the pair above one resistance level.
3. Well above expectations: Above +25K: Renewed confidence in Australia can start a rally, and two levels of resistance can be broken.
4. Below expectations: -9K to 0: A loss of jobs will not come as a total shock given the see-saw seen in recent months. In this case, the Aussie is set to resume its slide, with one level of support in danger.
5. Well below expectations: Below -9K: A double digit loss of jobs will be quite depressing and give the notion that Australia is seriously suffering from the global slowdown – two support levels are at risk.