Australian Jobs Strong Enough to Keep RBA Alert, But Not Force Action

Australia’s latest employment report was solid enough to keep the RBA alert, but not strong enough to force its hand. Rate markets continue to signal a pause, and price action across AUD/USD suggests traders are leaning towards consolidation rather than acceleration.

RBA cash rate futures imply a 96% probability the RBA will hold the cash rate at 3.85% at its next meeting, and there is little in today’s report to materially shift those expectations.

While the headline figures were firm, the details were mixed. Strength in full-time employment and a relatively low unemployment rate offset softer components beneath the surface.

Key Highlights from Australia’s Employment Report

• Unemployment remained at a healthy 4.1%, below its 12-month average of 4.2% and well beneath its long-term average of 6.5%.
• The participation rate rose from 66.7% to 66.9%, which helped keep the labour market tight.
• Full-time employment rose by more than 50k for a second consecutive month.
• Part-time employment fell by 32.7k, the sharpest decline in six months.

Jobs Data Fails to Shift RBA Outlook, AUD Risks Pullback

The muted reaction from Australian currency and bond markets suggests today’s employment report changes little for the RBA’s next meeting, which still appears set to leave rates unchanged at 3.85%. Overall, the data leans more supportive of the economy than not.

I continue to expect at least a modest retracement in the Australian dollar from current levels, with bears potentially targeting 0.70 and 0.69, although near-term trade could remain choppy.

The US dollar is rebounding, and risk appetite may stay capped while geopolitical tensions between the US and Iran remain elevated.

AUD/USD Technical Analysis: Australian Dollar vs US Dollar

The weekly chart shows a solid uptrend that likely needs to pause for breath. AUD/USD has formed two notable upper wicks over the past three weeks, yet bulls have made little progress. Weekly RSI remains heavily overbought, suggesting upside momentum may be stretched.

The daily chart shows Wednesday’s bearish engulfing candle also marked a lower high. While a bull flag could be forming, my bias is for prices to drift lower amid choppy trade towards 0.70. A break below that level brings 0.69 into focus and could prompt dip buyers into action.

Bears may therefore look to fade low-volatility moves towards 0.71 in the near term. A break above the 2023 high (0.7157) would invalidate the near-term bearish bias.

Chart analysis by Matt Simpson - Source: TradingView