AUD/USD Rally Wobbling as Strong Jobs Data Fails to Lift Aussie

• Australian employment hits fresh records despite slight unemployment rise
• Full-time jobs surged again, with hours worked posting a sharp annual increase
• Underutilisation remained near decade lows, pointing to ongoing labour tightness
• AUD/USD reversed gains as risk appetite in Asia soured, led by weakness in China

Summary

AUD/USD has failed to fire despite another strong Australian employment report, hinting the bullish run in February may be losing steam.

Another Blowout Australian Jobs Report

Australia’s labour market continued to ooze strength in January with both the participation rate and employment-to-population ratio climbing to record highs as more Australians entered the workforce. Despite surging participation, the unemployment rate edged up only slightly to 4.1%, reflecting strong hiring, particularly in full-time roles which grew by another 54,100. Overall employment hit a fresh record, lifting by 44,000—more than double economists’ forecasts.

Source: ABS

A key highlight of the report was the sharp rise in hours worked, surging 5.9% over the year, helped by the smallest January decline in five years. This suggests businesses are not only hiring but also making greater use of their existing workforce. Underutilisation—a broader measure of labour market slack that includes unemployed and underemployed workers—held near 10%, its lowest sustained level in over a decade.

While unemployment rose modestly, the steady decline in underutilisation and strong hours growth suggest spare capacity in the labour market continues to shrink, questioning whether the recent cooling in wage pressures will persist.

Beyond higher participation, the ABS noted that some of the increase in unemployment reflected “more people than usual with jobs in January who were waiting to start or return to work.” That suggests employment growth may remain firm in the months ahead.

RBA April Rate Cut Deemed Unlikely

Interest rate swaps markets continue to price in fewer than two further rate cuts from the RBA this year, with the second of the cycle not fully priced until August. The implied probability of a 25bp reduction at the bank’s next meeting in early April sits at just 17%.

Source: Bloomberg

AUD/USD: Doji Indecision a Turning Point?

Despite the firm employment data, AUD/USD was unable to hold its initial gains, reversing as risk appetite in Asia soured, particularly in Chinese markets which have been influential on AUD/USD movements over the past month. The Aussie’s correlation with Hang Seng futures over the past month sits at 0.81—a far stronger relationship than with rate differentials or key commodity markets.

Source: TradingView

After logging a string of doji candles earlier in the week, AUD/USD has broken out of the rising wedge it had been trading in since the start of the month, increasing the risk of a bearish unwind. For now, AUD/USD continues to cling to horizontal support at 0.6337. If that level breaks, traders could consider shorts beneath it with a tight stop above to guard against a reversal. Potential downside targets include 0.6300, the 50DMA, and 0.6238.

While MACD continues to trend higher, the bullish momentum signal may soon be countered by RSI (14), which looks on the verge of breaking its established uptrend.

-- Written by David Scutt

Follow David on Twitter @scutty