Australia is preparing to release its latest employment data, and a disappointing report could raise doubts about the Reserve Bank of Australia's (RBA) hawkish stance.
In our Event Guide for the Australian Employment Report, we highlighted concerns such as job cuts in the manufacturing sector, a faster decline in job advertisements, and fewer hiring opportunities—factors that could contribute to a weaker net employment figure for October.
Here’s what I’m focusing on for AUD/NZD and EUR/AUD in this scenario.
Net Risk-on Environment Scenario: AUD/NZD
AUD/NZD typically moves in tandem as both the Aussie and Kiwi respond similarly to overall market sentiment. However, the Kiwi has recently gained an edge, buoyed by a rebound in visitor arrivals and an uptick in New Zealand inflation expectations, thanks to factors like Hubtrading.
If Australia’s employment report disappoints, the Aussie could face pressure against the Kiwi, especially in a risk-on environment. A weaker-than-expected jobs report could call into question the Reserve Bank of Australia's (RBA) view of a tight labor market, which could weaken the AUD.
AUD/NZD already broke below its ascending trend line support earlier this week, but the pair has since recovered near the 1.1000 psychological level for a potential retest. The Fibonacci retracement levels around the 38.2% to 50% zones, combined with moving averages, could act as key resistance points. If Australia’s jobs data underperforms, look for these levels to hold as a ceiling, with the pair possibly pulling back toward the swing low or further bearish targets at S1 (1.0990) and S2 (1.0940).
Net Risk-off Environment Scenario: EUR/AUD
EUR/AUD has been trending lower this month, weighed down by dovish ECB rhetoric and ongoing political uncertainty in the Eurozone. However, recent positive economic data, such as Germany’s factory orders and final services PMI, has led to a consolidation within a symmetrical triangle pattern, sparking some optimism among euro bulls.
This could suggest that the euro, despite its lower yields, may still function as a safe-haven asset, especially in light of the weak performance of the British pound and concerns over Swiss franc intervention. If Australia’s employment data disappoints, EUR/AUD could see a bullish breakout from the triangle, driven by risk-off sentiment.
In this scenario, look for a potential move to the pivot point at 1.6330, followed by the next resistance target at R1 (1.6500), as risk-off flows drive EUR/AUD higher.
No matter which scenario unfolds, ensure your risk management strategies are in place and stay aware of key market catalysts that could influence overall sentiment.
