Australian Dollar hangs near August 7 low after weak jobs data, ahead of Trump-Xi summit

AUD/USD sticks to modest losses as the AUD remains depressed after the unimpressive jobs data.
Fed rate hike bets remain supportive of elevated US bond yields and continue to support the USD.
Traders, however, seem hesitant to place aggressive bets ahead of the crucial Trump-Xi meeting.

Haresh Menghani FXStreet

The AUD/USD pair hits a fresh low since August 7, around the 0.7025 region, following the release of Australian monthly jobs data, though it lacks follow-through selling and defends the 200-day Simple Moving Average (SMA) pivotal support.

The Australian Bureau of Statistics (ABS) reported that the number of employed people rose by 39K in August, compared to 20K expected and a decline of 15.8 K recorded in the previous month. The positive headline reading, however, was offset by a fall in full-time jobs and a rise in the Unemployment Rate to 4.6%, from 4.5% in July. This comes on top of the disappointment from Australia's flash PMIs, which showed a slowdown in services activity and a contraction in the manufacturing sector. The softer data tempers expectations of a follow-through move by the Reserve Bank of Australia (RBA) after the expected 25 basis points (bps) rate hike next week and undermines the Australian Dollar (AUD).

The US Dollar (USD), on the other hand, retains its strong bullish undertone amid rising bets for another interest rate hike by the Federal Reserve (Fed). In fact, traders are now assigning a higher probability that the US central bank will raise borrowing costs again in October. The bets were lifted by the S&P Global report, which showed that US business activity accelerated for a fourth straight month in September and registered the fastest pace of growth since July 2021. This keeps US bond yields close to multi-year highs and acts as a tailwind for the Greenback, weighing on the AUD/USD pair. Bears, however, opt to wait for a meeting between US President Donald Trump and his Chinese counterpart Xi Jinping.

AUD/USD daily chart

Technical Analysis

The AUD/USD pair holds just above the 200-day SMA at 0.7022 and the 61.8% Fibonacci retracement at 0.7006, reinforcing a nascent demand zone around 0.70 and hinting that dips toward this area are likely to attract buyers.

On the topside, initial resistance is seen at the 50.0% retracement at 0.7050, followed higher by the 38.2% level at 0.7094 and then the 23.6% retracement at 0.7149, where upside momentum could slow.

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

Economic Indicator

Unemployment Rate s.a.

The Unemployment Rate, released by the Australian Bureau of Statistics, is the number of unemployed workers divided by the total civilian labor force, expressed as a percentage. If the rate increases, it indicates a lack of expansion within the Australian labor market and a weakness within the Australian economy. A decrease in the figure is seen as bullish for the Australian Dollar (AUD), while an increase is seen as bearish.

Why it matters to traders?

The Australian Bureau of Statistics (ABS) publishes an overview of trends in the Australian labour market, with unemployment rate a closely watched indicator. It is released about 15 days after the month end and throws light on the overall economic conditions, as it is highly correlated to consumer spending and inflation. Despite the lagging nature of the indicator, it affects the Reserve Bank of Australia’s (RBA) interest rate decisions, in turn, moving the Australian dollar. Upbeat figure tends to be AUD positive.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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