AUD/JPY dropped to about 97.70 during Thursday’s early Asian session, marking a daily decline of 0.43%. This decrease came after Australia’s Unemployment Rate surged to 4.5% in September, the highest in four years. The Australian Bureau of Statistics noted that the unemployment rate rose from 4.3% in August, surpassing expectations. Additionally, Australia’s Employment Change came in at 14.9K for September, which was lower than the predicted 17K.

Impact of Employment Data on the Aussie

The weak employment data affected the Australian Dollar, indicating a softer labor market. This raised conversations about potential interest rate cuts by the Reserve Bank of Australia (RBA), considering the trends in consumer spending and inflation. In Japan, political uncertainty might delay any potential rate hikes from the Bank of Japan (BoJ). This situation could influence the Japanese Yen, possibly minimizing further declines for the AUD/JPY pair, as a new leader seeks support after a coalition’s breakup. The Reserve Bank of Australia influences the value of the Australian Dollar by setting interest rates. Additionally, the health of the Chinese economy, its Trade Balance, and Iron Ore prices are significant factors. Together, these elements determine the demand and strength of the AUD in the global market.

AUD/JPY Market Outlook

The AUD/JPY is facing pressure after Australia reported an unemployment rate of 4.5%, a level not seen since late 2021. This sharp rise strengthens the argument for the Reserve Bank of Australia to lower interest rates next month. In fact, overnight index swaps now reflect over a 70% chance of a 25-basis-point cut at the RBA’s November meeting. We view this as a chance to position for further AUD weakness against the Yen in the coming weeks. Derivative traders might consider buying AUD/JPY put options to benefit from a potential slide towards the psychological level of 96.00. The recent rise in one-month implied volatility to over 12% indicates that the market is preparing for larger price fluctuations, making options strategies particularly relevant. However, we need to pay attention to the situation in Japan, where political instability could slow the Bank of Japan’s plans for policy normalization. The BoJ has been very cautious since ending negative interest rates in 2024, and this uncertainty could make another rate hike before year-end less likely. Such potential JPY weakness could provide some support for the currency pair, preventing a full collapse. The overall outlook for the Aussie Dollar is also influenced by its major trading partners and commodity prices. Currently, iron ore prices are around $115 per tonne, down from their highs, raising concerns about China’s economic growth. Next week, all eyes will be on China’s Q3 GDP data; a weak report could increase pressure on the AUD. Given these mixed influences, the likely direction for the AUD/JPY appears to be lower in the short term. The recent labor market data is a clear indicator affecting RBA expectations, while the political situation in Japan is still unfolding. We believe selling out-of-the-money AUD/JPY call options could be a smart way to collect premiums while maintaining a cautious bearish outlook. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now