Release: AUS Employment Change (Feb) Consensus Forecast: 5.2K Previous: 46.3K

Release: Unemployment Rate Consensus Forecast: 5.2% Previous: 5.1%

Date/Time: 03/07/12 7:30 PM ET (00:30 GMT, 03/08)

Employment Key for RBA Expectations

Before we preview this release, just want to point you to 2 articles written about the fundamental picture for the Australian economy prior to the RBA interest rate decision and the 4th quarter GDP:

Preview: RBA Rate Decision and AUD/USD & Preview: AUS 4Q GDP & AUD/USD

In those articles we laid out some key factors including 1) the pricing out of about 50 basis points of cuts from the RBA during February, 2) the surprising manufacturing data in the 1Q, 3) but also the weak sign from the services sector which contracted in February.

While the Australia 4Q GDP release came in weaker than expected, the focus is on the coincident as well as forward looking data of which the employment report is one of the most important.

Slowdown in Hiring Expected After Strong January

The expectations is for a small gain in jobs of 5.2K, compared to a jump in jobs in January of 46.3K.

 
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With such small job gains and new entrants coming into the labor force, the consensus forecast is for the unemployment rate to rise to 5.2%.

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A stronger than expected result would help knock back some of the pessimistic expectations around the economy following the weak GDP release, which has increased the speculation that the RBA will be lowering interest rates in the near term.

A weaker than expected result, one in which the economy fails to add jobs, or actually loses jobs would increase the calls for a rate cut and would undoubtebly put downward pressure on the Australian Dollar.

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We continue to monitor the old level of support at 1.0595 for the sideways channel to see if it acts as resistance. A poor report will confirm the bias for this pair to fall further, down to ites next key support level of 1.04. However, a better than expected report - as well as positive progress on the Greek PSI deal - can help this pair to buck the recent weakness and push back into its trading range from February.

Australian Equities Break Trendline - A Warning Sign?

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The ASX 200 index, the key gauge for equities market in Australia, has shown some negative developments as a result of the general risk aversion seen to start the week as well as the GDP miss, as it broke an upward sloping support trendline as well as a break of the neckline of a possible double top. A weak employment report would indicate to investors that they should be concerned about the outlook for the Australian economy, which could act as a headwind for the Aussie.

For a technical analysis look at the AUD/USD see today's technical update: AUD/USD Has 1.04 In Sight After Double Top; A Trade Plan to Fade a Pullback

We will be reviewing the impact of this release on various AUD crosses in our daily Market Intelligence Briefing. Don't miss the opportunity to get in on the deep introductory rate offer. Click here to find out more.

Nick Nasad is a macro economist, market analyst, and educator; and one of the main contributors to FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.