Key Moments
- AUD/USD trades near 0.7120 in Asian hours on Thursday after shedding more than 0.5% of the prior day’s advance.
- Australia’s Unemployment Rate rose to 4.5% in July, while Employment Change dropped by 15.8K against expectations for a 15.0K increase.
- Fed minutes signal willingness to raise rates if inflation does not ease, but market-implied odds of a near-term hike have fallen to 32.7%.
Australian Dollar Slips After Disappointing Labor Report
AUD/USD is weaker during Thursday’s Asian session, trading around 0.7120 after giving back part of the more than 0.5% rally recorded in the previous session. The pair is under pressure as the Australian Dollar reacts negatively to softer domestic labor market figures.
Australia’s Unemployment Rate in July ticked higher to 4.5%, above the 4.4% level anticipated by markets. The deterioration was reinforced by a sharp decline in Employment Change, which fell by 15.8K jobs. This marked a stark reversal from June’s increase of 80.2K and contrasted with forecasts for a 15.0K rise in employment.
Rabobank Cites Limited RBA Repricing and China Risks
Strategists at Rabobank point out that expectations for additional policy tightening by the Reserve Bank of Australia remain restrained, stating that “market implied policy rates … currently priced for just 12 bps of rate hikes on a 3-month view.” They underscore that sentiment toward the Australian Dollar is being weighed down by multiple challenges, with “weaker Chinese demand for Australian commodities and a softer domestic economic climate” increasingly referenced as factors “potentially undermining the AUD going forward.”
Softer US Dollar Provides Partial Offset
The downside in AUD/USD may be cushioned by a weaker US Dollar, which is facing its own pressure from recent economic indicators and evolving Federal Reserve expectations. Minutes from the Fed’s July meeting indicated that policymakers were inclined to raise rates soon if inflation did not moderate, after keeping the federal funds rate at 3.5%-3.75%.
Although inflation gauges remain above the 2% target, more recent monthly data has signaled only moderate price pressures, reducing the urgency for aggressive tightening. These signs of easing inflation have led markets to scale back expectations for an imminent rate move. The CME FedWatch Tool shows that traders are assigning a 32.7% probability to a rate increase at the next Fed meeting, down from 47% one month earlier.
AUD/USD Technical Picture: Bullish Bias Intact Above Key Averages
On the daily chart, AUD/USD is quoted at 0.7110, maintaining levels above both the nine-period and 50-day Exponential Moving Averages. This configuration points to a constructive short-term bullish tone as the pair trades higher relative to its recent consolidation area. The 14-day Relative Strength Index stands at 63.2, remaining in bullish territory without yet signaling overbought conditions. This suggests that upside momentum is still supportive while broader Fed-related sentiment, as tracked by the FXS Fed Sentiment Index, remains subdued relative to earlier highs.
| Indicator / Level | Value | Implication |
|---|---|---|
| Spot price (daily chart) | 0.7110 | Trading above key EMAs, signaling constructive bias |
| Nine-period EMA | 0.7087 (approx.) | First support on pullbacks |
| 50-day EMA | 0.7034 (approx.) | Deeper support area where buyers may reemerge |
| RSI (14-day) | 63.2 | Bullish momentum, not yet overbought |
| Upside resistance | 0.7200 | Psychological barrier and initial upside target |
From a technical standpoint, the first notable resistance is located at the psychologically important 0.7200 handle. On the downside, initial support is seen at the nine-period EMA near 0.7087, with a more significant support zone at the 50-period EMA around 0.7034, where dip buyers would be expected to step in if the pair retreats.
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