AUD/USD fell 0.22% on Thursday, trading around 0.7110, after Australia’s July labour report weakened the Australian Dollar. The ABS said the economy lost 15.8K jobs versus expectations for a 15K gain, while the Unemployment Rate rose to 4.5% from 4.4% and above forecasts for 4.4%. Markets trimmed expectations of further RBA rate rises, even as prior commentary kept attention on inflation risks and the possibility of tighter monetary policy.
Losses were contained by a softer US Dollar, with the DXY below 99.00 after touching a three-month low on Wednesday. Falling US Treasury yields also weighed after the US Treasury said it would increase liquidity-support buybacks for longer-dated securities, at least doubling the size of some operations across 10- to 30-year maturities. The 30-year yield retreated from 5.30%, its highest since 2007, though 10-year and 30-year yields edged slightly higher on Thursday; Fed July minutes showed many officials saw scope for further tightening if inflation does not cool towards the 2% target. Technically, AUD/USD held above the 100-period SMA at 0.7101 and the 200-period SMA at 0.7081, with support at 0.7095, resistance at 0.7130 then 0.7200, RSI (14) at 47, and lower levels at 0.7067.
Resilient Fundamentals and the Strategic Commodity Shield
We see the recent drop in the Australian dollar to 0.7110 as a prime buying opportunity for derivative traders rather than a sign to panic. While the unexpected loss of 15.8K jobs in July pushed Australia’s unemployment rate to 4.5%, structural global demand keeps the currency resilient. Historically, Australia’s strategic commodity exports in energy, defense, and AI-related metals have shielded the currency from prolonged sell-offs during domestic labor dips.
Trading Strategy and Outlook Amid Supportive Backdrop
We must also look at the weakening US Dollar, with the US Dollar Index slipping below 99.00, a level not seen consistently since mid-2023. The US Treasury’s decision to double its buyback operations has successfully cooled the 30-year yield from its recent peak of 5.30%. This intervention limits the Greenback’s upside, creating a highly favorable backdrop for AUD/USD bulls.
For the coming weeks, we recommend option traders utilize credit put spreads, specifically targeting strike prices just below the 200-period moving average of 0.7081. Selling out-of-the-money puts at 0.7050 allows us to safely capture premium while the pair consolidates. The solid support cluster near 0.7095 suggests that downward moves will be heavily cushioned.
We should closely monitor upcoming central bank commentary, as the gap between the Federal Reserve’s hawkish minutes and the Reserve Bank of Australia’s likely pause could trigger short-term volatility. However, Australia’s attractive carry trade continues to draw steady capital inflows, keeping the medium-term outlook stable. Leveraged traders should use this consolidation phase to build long futures positions on minor dips toward the 0.7100 level.
