Employment Report Overview

The RBA will be watching this one for January very closely looking for continued improvements in the data after December’s that was beating expectations for the second consecutive month. While employment growth is far slower than what was seen in 2015 and lagging behind improved conditions elsewhere in the economy, even though the labour market conditions aren’t great, they’re not so terrible either – yet they are still a big concern to the RBA noting the last unemployment rate at an 11-month high.

However, one has to consider that the participation rate participation rate edged up to 64.7% from 64.6% in November and as such the disappointments there was courtesy of a lift in the number of persons seeking work, rather than job losses.

Key notes

Markets are assuming that growth may well be too slow to reduce underemployment and perhaps to stop the unemployment rate increasing. The consensus is for a sluggish outcome on the headline and employment change at 10.0K vs the previous 13.5K. On the unemployment rate, that is expected at no change to previous at 5.8%. The participation rate is also expected to hold steady at 64.7%.

How could it affect AUD/USD?

An inline report would be slightly disappointing considering the RBA are looking for a considerable improvement in the sector while Australia is struggling with weak inflation. Policy makers have only been expecting inflation to reach the bottom of their 2 to 3 percent target at the end of 2018. Another key factor of late and concerning to the RBA is that most of the jobs growth has come from part-time work. Prior full-time employment chang was 9.3K while part-time employment change prior was 4.2K.

All things considered, the Australian dollar can rally hard on positive outcomes today. Any vast improvements could make for the foundations for a stronger for longer Aussie continuing on its northerly trajectory in 2017 so far. The price has already penetrated the daily resistance of 0.7680 and previous high for the month/2017 at 0.7718 so November’s high at 0.7777 could quickly come under pressure on a strong and encouraging report. 0.7831 was the 2016 high. Sellers are noted at 0.7730/40 with close-knit buyers at 0.7710, 0.7680/90 levels that would come under pressure on a poor aggregate outcome, accelerating through stops to 0.7605/20 and to the bottom of 6th Feb commencing sideways channel.

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