May month employment statistics from the Australian Bureau of Statistics, up for publishing at 01:30 GMT on Thursday, will be the immediate catalyst for the AUD/USD pair traders. The figures become all the more important after the Reserve Bank of Australia’s (RBA) governor recently sounded cautious over the wage growth by nudging away rate hikes and tapering concerns.
Market consensus favors Employment Change to reverses the previous -30.6K with +30.0K on a seasonally adjusted basis whereas the Unemployment Rate is likely to remain unchanged at 5.5%. Further, the Participation Rate may also stay intact, a bit up from 66.0% prior to 66.1%.
TD Securities expect a mixed data while saying,
We expect a headline employment decline of -20k (market forecast: +30k) in May, contrary to market expectations for a positive employment outturn that would reverse last month’s 30k drop. We think the risks are skewed to the downside. We are factoring in some risk for JobKeeper’s expiry to be reflected in the May data while the weaker US and CA employment prints suggest downside risks to consensus. On the participation rate, we expect it to edge up to 66.1% (last:66.0%) following the surprise fall last month with partial labor market indicators pointing to robust labor demand. Accordingly, we expect the unemployment rate to rise to 5.7% from 5.5% previously. This is still within our central scenario as we had expected a slight uptick in the u/e rate by Jun before falling back to 5.25% by year-end.
Additionally, analysts at Westpac said,
The May jobs report is expected to show employment rose by 30k. We also expect the unemployment rate to rose from 5.5% to 5.7% (market consensus is 5.5%) due to a rebound in participation.
How could the data affect AUD/USD?
AUD/USD remains pressured near the two-month low surrounding 0.7600 ahead of the event. The Aussie pair recently dropped on the cautious comments from RBA Governor Philip Lowe while its slump on Wednesday, the biggest in two weeks, could be attributed to the US Federal Reserve’s (Fed) bullish bias.
As RBA’s Lowe has already conveyed his worries over the wage price growth, strong employment data could offer the needed bounce to the AUD/USD prices. On the contrary, any negative surprise will help the bears cheer the drop to the sub-0.7600 area.
Having breached the ascending trend line connecting lows marked in mid-April and early June, around 0.7655, AUD/USD becomes vulnerable to test 0.7560-50 area comprising lows marked in February and March, also 200-day SMA, during the further weakness. It’s worth noting that June 03 low near 0.7645 guards the Aussie pair’s immediate upside.
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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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