Insights 
VT 
The Australian jobs report for June showed weaker results than anticipated. The unemployment rate was 4.3%, higher than the expected 4.1%, which is the highest since late 2021. Employment change showed a gain of 2,000 jobs, falling short of the expected 20,000. Full-time employment decreased by 38,200 jobs, while part-time roles increased by 40,200 jobs.
The report indicates a rising jobless rate and a shift in job quality, as full-time positions decreased while part-time jobs rose. The weaker-than-expected job gains suggest emerging weakness in the labour market. The immediate reaction saw the AUDUSD decline as expectations for an RBA rate cut grew. However, buyers pushed the price up during the North American morning session.
Technical Analysis Overview
The hourly chart showed price movements below key retracement levels. The price fell below the 38.2% retracement level at 0.65096 and the previous day’s low at 0.6495. It extended to 0.64535, just below the 61.8% retracement at 0.6457. A rebound brought the price back to around the 50% midpoint at 0.64833, close to last week’s lows. Future price movement could aim for the 38.2% retracement target again if price breaks above the current midpoint level.
We view the surprising weakness in the Australian labor market as a pivotal shift for policy expectations. According to market pricing from sources like Reuters, traders are now factoring in more than a 70% chance of a Reserve Bank of Australia rate cut by November. This fundamentally alters the landscape for the Australian dollar, creating a bearish outlook.
In response, derivative traders should consider establishing bearish positions on the AUDUSD in the coming weeks. We believe purchasing put options is a prudent strategy to capitalize on expected downside. This approach offers a defined risk while allowing for participation in a potential move lower.
Investment Strategy Recommendations
We would use the current corrective bounce as an opportunity to initiate these positions. The area around the 50% midpoint at 0.6483 represents a key resistance level where sellers previously entered the market. Establishing bearish trades near this zone could offer a favorable risk-to-reward setup, mirroring the rejection seen earlier at 0.6495.
Historically, periods of weakening domestic data that precede central bank easing cycles have resulted in sustained currency depreciation. During the RBA’s 2019 easing cycle, the AUDUSD fell over 7% in six months as interest rate differentials narrowed. We anticipate a similar dynamic could unfold, suggesting any short-term strength is an opportunity to position for longer-term weakness.
