Australia's September employment fell by 39,300, and rate markets now price less than one more 25bp RBA hike through mid-2027. AUD/USD broke below 0.6948 support as the Aussie weakened against all seven major peers. Quarterly CPI on October 28 is the next test.
AUD/USD fell on Thursday after Australian employment contracted by 39,300 in September, against forecasts for a 20,000 increase. The unemployment rate held at 4.7%, which ActionForex describes as the highest level of the post-pandemic period.
Aussie weakened against all seven major counterparts, with particularly pronounced losses against NZD, JPY and several European currencies. AUD/USD also declined despite a broader retreat in Dollar Index, which suggests Australian-specific selling pressure played a part.
Part-time losses drive the jobs decline
Part-time positions fell by 73,700, overwhelming a 34,400 increase in full-time employment. Participation declined from 67.0% to 66.8%.
However, the underlying picture was less alarming. ABS trend estimates showed employment increasing by 15,700, while trend unemployment remained unchanged at 4.6%. The ABS also cautioned that survey methodology changes could have affected September's seasonally adjusted figures.
Markets price less than one more RBA hike
The RBA raised its cash rate by 25bp to 4.60% in September, its fourth increase this year. Overnight indexed swap pricing implied a projected peak of 4.81% in June 2027, only 21bp above the current cash rate and therefore less than one additional 25bp increase.
Economists remain divided on the next rate hike. Westpac continues to anticipate a November hike to 4.85%, while Commonwealth Bank expects a November hold and JPMorgan anticipates no additional increases.
AUD/USD breaks 0.6948 support
ActionForex says AUD/USD presents a more immediately bearish technical picture after breaking below 0.6948 support. The rebound from 0.6903 stalled at 0.7012, below the 38.2% retracement of the decline from 0.7237.
Immediate focus returns to 0.6903 support, according to ActionForex. A break would target 0.6864, followed by 0.6824, while strong support is expected around 0.6756.
The next catalyst is the Australian quarterly CPI report on October 28, which will test whether markets have moved too far in reducing rate hike expectations.
Source: ActionForex
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