Australian Employment Preview: Disappointing figures mostly priced in

Australia is expected to have recovered just 40K job positions in July.
RBA’s Governor Lowe anticipated the unemployment rate could fall to 10% by year-end.
AUD/USD could seesaw with the data, but the direction will continue to depend on sentiment.

Valeria Bednarik FXStreet

Speculative interest is heading into the release of Australian employment data without much expectations. The country is anticipated to have recovered just 40K job positions in July, way below the 210.8K added in June. The unemployment rate is expected to have ticked higher to 7.8% from 7.4% in the previous month, while the participation rate is seen rising from 64% to 64.4%.

Wages growth and the RBA

Just last week, RBA’s Governor Lowe repeated that, while the economy is recovering, “this recovery is, however, likely to be both uneven and bumpy,” amid the latest lockdown in the Victoria region. The Reserve Bank of Australia also forecasted that economic activity would contract by 6% this year, while policymakers see the unemployment rate rising to around 10% by the end of the year. With this in mind, an uptick to 7.8% as forecasted would be negative for the Aussie, but far from a surprise.

Ahead of the monthly employment report, the country published the Q2 Wage Price Index early on Wednesday, which was up by 0.2% in the quarter, and rose 1.8% when compared to the second quarter of 2019. That would be the slowest pace of growth on record, and the weakest reading since the records began in September 1997. The headlines had a limited impact on the Aussie, as the AUD/USD pair briefly dipped to 0.7108 to trade now in the green on the back of the market’s sentiment, which still is the main market motor.

AUD/USD possible scenarios

An upbeat reading could boost AUD/USD momentum, moreover considering the market is waiting for a poor outcome. The market is now betting against the greenback, but these days, the dollar tends to appreciate during US trading hours, amid optimism about a US economic comeback, after US President Trump said he sees no reason why the country won’t growth 20% in Q3.

Should the dollar head into the release with a strong note and Australian figures result worse than anticipated, then chances are of a steeper decline. The level to watch to the downside is 0.7070, as a break below it would signal a bearish continuation. To the upside, the level to surpass is 0.7200.

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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