Preview of Australia’s Employment Data: Implications for the AUDUSD

The AUDUSD will be in focus as Australia announces its Employment Change and Unemployment Rate data for April 2020. This announcement by the Australian Bureau of Statistics is the first jobs data that fully capture the effect of the coronavirus pandemic in Australia and the impact of the government’s response as far as employment is concerned. 

The estimates are for 575,000 jobs to have been lost, with a rise in unemployment to 8.3%. Previous figures were an employment change of +5.9K and unemployment rate of 5.2%. The JobKeeper scheme of the Australian government and the associated wage bill may become relevant to this month’s employment data. 

The AUDUSD may react not to the actual numbers per se as these may already have been priced in. Rather, traders may focus on the relationship between the unemployment rate and the survey participation rate: employable but unemployed Australians who are actively looking for work at the time of the employment change survey. 

In other words, is the rise in the unemployment rate due to a reduction in participation rates, or is it a function of disruptions to economic activity from the coronavirus pandemic? These questions are what the numbers will answer tomorrow at 1 am GMT.

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Outlook for AUDUSD

For employment data to be considered for trading, there must be no conflict. The Employment Change and the Unemployment Rate must not move in the same direction. 

A drop in employment change below -575K, accompanied by a rise in the unemployment rate beyond 8.3%, will be considered a situation of underemployment. This may be regarded as AUD-negative and could lead to a selloff in the AUDUSD. The lower border of the ascending channel and the 200-EMA presently support price. A selloff in the AUDUSD could lead to a breakdown of the 200-EMA and the channel’s lower border, which targets 0.63890 (17 April high and 7 May low). This support is the neckline of the identified double top pattern. A breakdown of 0.63890 completes the evolution of the double top, opening the door for further decline towards 0.62625, which concludes the breakdown’s measured move from the top to the neckline. 0.61748 may come into the picture if the pair is seen. This option may get further fundamental backing from the strengthening of the USD by the Fed Chair’s comments. 

If the unemployment rate is less than 8.3% and the employment change is not as pronounced as projected, we may see some strengthening of the AUDUSD. This scenario could prompt a bounce from the 200-EMA/lower channel border support, targeting the opposing channel border as a result. This move has to overcome 0.65257 and 0.66742 along the way to be actualized.

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