October month employment statistics from the Australian Bureau of Statistics, up for publishing at 00:30 GMT on Thursday, will be the immediate catalyst for the AUD/USD pair traders. The jobs figures become more important after the Reserve Bank of Australia (RBA) Governor Philip Lowe and the RBA Statement on Monetary Policy (SoMP) highlights the need for higher wage growth for the cash rate hike.
Market consensus favors Employment Change to jump from -138K previous readouts to +50K on a seasonally adjusted basis whereas the Unemployment Rate is likely to rise from 4.6% to 4.7%. Further, the Participation Rate may also rise from 64.5% to 64.8%.
TD Securities expect mixed data while saying,
Given that NSW and VIC have significantly eased restrictions in Oct, the RBA will be keenly watching the Oct job numbers to gauge the strength of the rebound in the labor market. The Bank is upbeat and expects jobs to fully recover to pre-Delta levels (Aug) by year-end (as stated in its Nov SoMP). We expect headline employment to rise by 90k (market forecast: 50k, Sep: -138k). We are more bullish than consensus given the better weekly payroll data and robust job vacancies levels. The Participation rate is expected to pick up to 65% in tandem with the reopening, lifting the u/e rate to 4.7% from 4.6%.
Additionally, analysts at Westpac said,
Balancing the start of NSW’s recovery against the last stage of Vic’s lockdown, Westpac anticipates employment to fall by -50k in October (market median is +50k), with risks to the upside. A further decline in participation should limit the rise in the unemployment rate to just 0.1ppt (Westpac f/c: 4.7%).
How could the data affect AUD/USD?
AUD/USD licks its wounds around a monthly low near 0.7330 ahead of the key Aussie data amid a lack of catalysts and the US bank holiday. Even so, fears emanating from China’s Evergrande and updates concerning the Sino-American trade deal weigh on the quote of late.
The recent unlocks in New South Wales (NSW) and Australian Capital Territory (ACT) has already signaled firmer employment data from Australia. However, the RBA has an additional filter namely sustained inflation between 2.0% and 3.0%, other than the tighter labor market and higher wages growth, to unveil confidence over the rate hike. Also, challenging the RBA rate hike is the Fed’s refrain from a rate lift. Hence, the AUD/USD bears may reap the benefit of the doubt and can keep the reins even as employment data matches upbeat forecasts. It should be noted, though, that an extremely strong jobs report may not hesitate to push back the short-term sellers.
Technically, AUD/USD remains below a convergence of the 100-DMA and the 50-DMA, around 0.7370 by the press time, amid bearish MACD. The same hints at the quote’s further weakness towards the 61.8% Fibonacci retracement (Fibo.) level of September-October upside near 0.7320.
Should the data offers positive surprise and recall the AUD/USD buyers, 38.2% Fibo. and the monthly resistance line will check the short-term recovery moves close to 0.7410.
Key Notes
AUD/USD Forecast: Australian employment and inflation to be a make it or break it for the pair
AUD/USD flirts with monthly low under 0.7350, Aussie employment report eyed
Australian Employment Preview: A positive surprise or too much optimism?
About the Employment Change
The Employment Change released by the Australian Bureau of Statistics is a measure of the change in the number of employed people in Australia. Generally speaking, a rise in this indicator has positive implications for consumer spending which stimulates economic growth. Therefore, a high reading is seen as positive (or bullish) for the AUD, while a low reading is seen as negative (or bearish).
About the Unemployment Rate
The Unemployment Rate released by the Australian Bureau of Statistics is the number of unemployed workers divided by the total civilian labor force. If the rate hikes, indicates a lack of expansion within the Australian labor market. As a result, a rise leads to weaken the Australian economy. A decrease of the figure is seen as positive (or bullish) for the AUD, while an increase is seen as negative (or bearish).