Australian Dollar Could Still Catch a Break on AU Employment Data

AUDUSD
AUDUSD

At 1.30 am GMT, the Australian Employment data are scheduled for release, with markets expecting an Employment Change of 30K, versus a previous figure of 210.8K. The unemployment rate is expected to have risen slightly from 7.4% (previous number) to 7.8%. The participation rate is expected to have remained flat at 64%. So all in all, the markets are expecting a deterioration in the employment situation in Australia. So what has changed from the last time?

The coronavirus epidemic reared its head once more, prompting a 6-week lockdown in Melbourne. This development put some strain on businesses, just when the country had reopened after containing the initial outbreak to a high degree. Lockdowns lead to a drop in business activity, which leads to job losses. However, these losses have been tapered by the government’s wage support program. The report is also coming on the back of an extended period of weakness on the greenback. A combination of bearish sentiment on the USD, as well as a moderately worse employment situation which could have been priced in by the markets, place the AUD in good stead ahead of this report, unless something very dramatic were to happen. 

Trade Expectations and Outlook

The upside momentum of the AUDUSD could be retained if the employment numbers are positive (lower or static unemployment rate + higher-than-expected employment change). This would allow for targeting of the 0.72043 immediate upside target, as the price moves towards the upper border of the wedge pattern). 0.72977 and 0.73831 are further targets to the north. Attainment of these targets will invalidate the pattern and preserve the pair’s uptrend. 

Conversely, the numbers have to be far worse than expected to produce a steep decline. A break of the wedge has to accompany such a fall, targeting the 0.70595 or 0.70034 support targets. A report that is not too far off the pace, even if it is on the negative end, may only produce a slight decline before the pair resumes the uptrend. 

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