January month employment statistics from the Australian Bureau of Statistics, up for publishing at 00:30 GMT on Thursday, will be the key catalyst for the AUD/USD pair traders. With the Reserve Bank of Australia (RBA) has been trying to ignore coronavirus and bushfires, while keeping a close eye on the jobs report, a set of downbeat data will increase the odds of further rate cuts in 2020.
Market consensus favors Employment Change to decline to 10.0K from 28.9K on a seasonally adjusted basis whereas the Unemployment Rate is likely to inch up from 5.1% to 5.2%. Also, no change is anticipated in 66.00% Participation Rate.
Westpac stays modestly pessimistic ahead of the release as their analysts say,
Australia’s unemployment rate printed below consensus in Nov and Dec, falling from 5.3% to 5.1% over those months. The RBA placed considerable weight on these releases which came between their December 2019 and February 2020 Board meetings. So there is considerable market significance in every monthly labor force survey. In January’s report, a smaller rise in jobs than December’s healthy 29k seems likely. The consensus is 10k; Westpac is on 15k while warning that the seasonal adjustment factor in January is the largest of the year. We expect the unemployment rate to tick back up to 5.2% and 66.0% participation rate, in line with consensus.
The Australia and New Zealand Banking Group (ANZ) highlight the importance of the data:
We have Australian jobs data, which the market plays close attention to, and has the potential to reset sentiment, especially with the market pricing in cuts against a backdrop of RBA optimism. The market expects a moderation (+10k) after last year’s decent run, but we expect a small fall (-5k). If the data are soft, expect the AUD to come under pressure.
How could the data affect AUD/USD?
Considering the recent improvement in Unemployment Rate and the RBA’s repeated small attention to the coronavirus and bush fires’ impact on the economy suggest the AUD/USD could recover from decade lows in a case of positive surprises. However, a downbeat set of data might not refrain from pleasing the bears amid coronavirus fears.
Technically, the bears will look for entry below 0.6660 to target 0.6600 and late-February 2009 tops near 0.6545. On the upside, 10-day SMA near 0.6700 offers the immediate resistance ahead of the two-week-old falling trend line near 0.6725.
Key Notes
AUD/USD muted on FOMC, but on the back foot as we head towards key unemployment data event
UD/USD Forecast: Nearing an over one-decade low at 0.6661
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).
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