Australian Employment Change Preview: Another strong report?

• Australia is expected to have created 25,000 new jobs in April.
• The Wage Price Index rose 0.8% in the first quarter.
• The AUD/USD remains sideways, with risk in the short term tilted to the downside.

The monthly Australian job report will be out on Thursday, May 18. The country is expected to have added 25,000 new positions in April. The consensus is for the Unemployment Rate to remain at 3.5%, while the Participation Rate is seen holding at 66.7%.

Australia Unemployment Rate to remain near record low

In March 2023, the Australian economy added 53,000 jobs, surpassing expectations. The Unemployment Rate stood at 3.5%, slightly above the record low of 3.4%. The news briefly boosted the Australian Dollar, with AUD/USD testing levels above 0.6800 before reversing.

The strong employment numbers served as an argument for the Reserve Bank of Australia (RBA) surprise rate hike on May 3. This decision also briefly boosted the Aussie. Declining commodity prices and evidence of weak economic activity in China, plus a somewhat stronger US Dollar, kept AUD/USD below 0.6800.

Data released Wednesday showed that during the first quarter, the Wage Price Index rose 0.8% quarterly and 3.7% year-on-year. This report, together with the wage data and employment numbers, may not be enough for the RBA to hike rates again at the June 6 meeting.

Other employment indicators point to the labor market continuing to show tight numbers. Some of these are already priced in. However, such figures will add more evidence, keeping the door open (or the bias) to further tightening from the RBA, thus helping the Aussie.

The monthly Consumer Price Index (CPI) indicator due on May 31 will be crucial. The CPI rose 6.3% in the 12 months to March. So far, market consensus is for the RBA to keep rates unchanged. The interest rate market sees rate cuts beginning early 2024, instead of late 2023 as previously expected.

AUD/USD still in consolidation mode

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An upbeat jobs report could trigger a rally in AUD/USD, but its sustainability depends on other factors, mostly external ones. For the pair to break above 0.6800, it looks like a stronger Australian dollar alone is not enough. Positive data could bring the pair closer to the key area.

Risk in the short term look tilted modestly to the downside for the AUD/USD pair while it is under 0.6700 and under key daily moving averages. However, the main trend is sideways.

Negative employment numbers could have an even a larger impact considering the short-term bearish bias. A slide under 0.6640 would expose the round-figure support at 0.6600 before the 2023 lows around 0.6560. Below that, Aussie bears might take control.