Aussie Dollar Drops on Weak Jobs, Soft USD Limits Loss

Key Moments

Australian Labor Data Knocks AUD, But Dollar Softness Offers Support

The AUD/USD pair came under renewed pressure during the Asian session on Thursday after weaker-than-expected Australian labor market data, with the exchange rate dipping to a one-week low below the mid-0.6900s. The move followed a pullback from the monthly peak above the 0.7000 level, as investors reacted to a surprisingly weak employment report.

The downside in AUD/USD was partly offset by broad-based US Dollar softness. The greenback extended its retreat from the post-CPI swing high and from the April 2025 peak, encouraging some profit-taking and helping to slow the Australian Dollar’s decline. This dynamic left market participants cautious about aggressively extending the prior session’s downside move from above the 0.7000 psychological threshold.

Australian Jobs Report Undermines Rate-Hike Expectations

Fresh figures from the Australian Bureau of Statistics (ABS) showed a marked deterioration in labor conditions in September. The number of employed people fell by 39.3K, reversing the previous month’s gain of 39.5K and sharply missing the consensus forecast for a 20K increase. At the same time, the Unemployment Rate ticked up to 4.7% from 4.6% in August.

These data points weakened expectations for another rate hike from the Reserve Bank of Australia (RBA), putting pressure on the Australian Dollar. The disappointing print was seen as a clear negative surprise relative to both the prior month’s strength and market forecasts, adding a macroeconomic headwind for AUD even as developments in the US Dollar provided some offset.

US Inflation, Yields, and Policy Expectations Shape USD Tone

On Wednesday, the US Consumer Price Index (CPI) report indicated broadening inflation pressures, reinforcing market expectations for further monetary tightening by the Federal Reserve. Despite this, traders continued to assign roughly a 75% probability that the Fed will keep rates unchanged at its October policy meeting.

This backdrop contributed to a further pullback in US bond yields, encouraging additional profit-taking in the US Dollar and extending the currency’s retracement from its recent highs. The resulting USD softness lent some support to AUD/USD, partially counterbalancing the negative impulse from Australian labor data. However, ongoing geopolitical uncertainties were seen as a factor that could still limit the downside in the US Dollar, given its safe-haven appeal.

At the same time, market participants appeared to maintain the view that the Fed will ultimately raise borrowing costs by the end of the year, amid persistent inflation risks tied to volatile energy prices. This mixed policy outlook kept investors focused on incoming US data and Fed commentary for confirmation.

Focus Turns to US PPI and Fed Chair Warsh’s Remarks

Attention now shifts to the upcoming release of the US Producer Price Index (PPI), scheduled for later on Thursday. The PPI data are expected to offer additional insight into inflation dynamics and could influence expectations for the Fed’s next policy steps, thereby impacting US Dollar performance and, by extension, AUD/USD.

Beyond PPI, investors are also awaiting remarks from Fed Chair Kevin Warsh on Friday. His comments are likely to be scrutinized for signals on the future policy path and could play a decisive role in shaping near-term US Dollar direction and providing fresh impetus for the AUD/USD pair.

AUD/USD Technical Picture: Bearish Bias Below Key Moving Average

From a technical standpoint, AUD/USD maintains a mildly bearish short-term tone. On the 4-hour chart, the pair continues to trade below the 100-period Simple Moving Average (SMA), reinforcing the notion that upside attempts remain constrained in the near term.

Spot is also hovering just beneath a previously supportive upward trend line around 0.6960. This configuration suggests that the former support has now turned into nearby resistance, implying that rallies may struggle while the pair stays capped beneath this area and the overhead moving average.

The 100-period SMA, currently around 0.6986, is seen as the first notable resistance level, strengthening the broader ceiling on recovery efforts ahead of the recent swing high near 0.7015. On the downside, the next key support is identified at the structural swing base around 0.6905, where buyers would be anticipated to step in if the pullback in AUD/USD extends further.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Australian Employment Change: Latest Release Overview

The Employment Change s.a. indicator, released by the Australian Bureau of Statistics, tracks the monthly change in the number of employed people in Australia, adjusted for seasonal factors. A rising Employment Change figure is generally seen as supportive for consumer spending and economic growth, which tends to be positive for the Australian Dollar. Conversely, a weak reading is typically regarded as negative for the currency.