The Australian jobs report for June revealed disappointing results. The unemployment rate rose to 4.3%, surpassing the expected 4.1%. This is the highest rate we’ve seen since late 2021. Employment saw a slight increase of just 2,000 jobs, while analysts had predicted a gain of 20,000. Full-time jobs dropped by 38,200, but part-time jobs increased by 40,200. This report signals a higher jobless rate and a change in job quality, with full-time positions decreasing and part-time jobs rising. The unexpected job gains hint at growing weakness in the labor market. As a result, the AUDUSD initially fell as expectations for a Reserve Bank of Australia (RBA) rate cut increased. However, during the North American morning session, buyers pushed the price back up.

Technical Analysis Overview

The hourly chart showed that prices fell below important retracement levels. Prices dropped below the 38.2% retracement level at 0.65096 and the previous day’s low at 0.6495, extending to 0.64535, just under the 61.8% retracement level at 0.6457. A rebound brought prices back near the 50% midpoint at 0.64833, close to last week’s lows. If prices break above this midpoint, they could aim for the 38.2% retracement target again. The unexpected weakness in the Australian labor market could significantly affect policy expectations. Market estimates from sources like Reuters show that traders now see over a 70% chance of an RBA rate cut by November. This change alters the outlook for the Australian dollar, leading to a bearish outlook. In light of this, derivative traders might want to consider bearish positions on the AUDUSD in the upcoming weeks. Buying put options could be a smart move to take advantage of the anticipated decline. This strategy provides defined risk while allowing for potential gains in case prices fall.

Investment Strategy Recommendations

We recommend using the current upward bounce to start these trades. The area around the 50% midpoint at 0.6483 acts as a key resistance level where sellers have previously entered. Establishing bearish trades near this point could provide a good risk-to-reward setup, similar to the rejection seen earlier at 0.6495. Historically, periods of weak domestic data leading to central bank easing cycles have led to ongoing currency depreciation. For instance, during the RBA’s 2019 easing cycle, the AUDUSD fell over 7% in six months due to narrowing interest rate differentials. We expect a similar scenario could happen now, suggesting that any short-term strength presents an opportunity to position for longer-term weakness. Create your live VT Markets account and start trading now.

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