The Australian labour market delivered another strong jobs report, with employment and participation hitting fresh highs. However, AUD/USD struggled to sustain its gains, reversing as risk appetite weakened in Asian markets. The February bullish trend is now under threat, with technical signals hinting at a potential pullback.
Australian Jobs Data Surpasses Expectations
Australia’s labour market remained strong in January 2025, with the participation rate and employment-to-population ratio climbing to record levels. Despite this, the unemployment rate edged up slightly to 4.1%, reflecting continued strong hiring, particularly in full-time positions, which grew by 54,100. Total employment rose by 44,000, more than double economists’ forecasts.
A key takeaway from the report was a sharp 5.9% increase in hours worked, marking the smallest January decline in five years. The data suggests businesses are expanding their workforce while also increasing utilization of existing employees. Meanwhile, underutilisation levels remained near decade lows, signaling a tightening labour market despite the marginal rise in unemployment.
The Australian Bureau of Statistics (ABS) noted that some of the increase in unemployment was due to more people waiting to start or return to work, suggesting that employment growth could remain strong in the coming months.
RBA Rate Cut in April Looks Unlikely
Market expectations for Reserve Bank of Australia (RBA) rate cuts continue to shift, with interest rate swaps pricing in fewer than two rate reductions for 2025. The likelihood of a 25-basis point cut in April sits at just 17%, suggesting traders expect the RBA to hold rates steady for the near future.
Technical Analysis: AUD/USD Faces Indecision
Despite firm employment data, AUD/USD failed to sustain gains, reversing as risk sentiment in Asian markets deteriorated, particularly in China. The Aussie’s correlation with Hang Seng futures remains high at 0.81, surpassing its ties with interest rate differentials and commodity prices.
From a technical perspective, AUD/USD has broken below its rising wedge pattern, signaling potential bearish momentum. The pair is currently testing key horizontal support at 0.6337. If this level breaks, downside targets could include 0.6300, the 50-day moving average (DMA), and 0.6238.
While MACD remains positive, bullish momentum could be countered by RSI (14), which appears on the verge of breaking its uptrend. This suggests the pair could be at a pivotal point, with traders monitoring key technical levelsfor further direction.
With market sentiment fragile and the Aussie’s rally faltering, traders will be closely watching upcoming economic data and risk trends to determine the currency’s next move.
