Go short on AUDUSD due to anemic labor market in Australia

Australia’s labor market delivered unexpectedly pessimistic results in September, putting additional pressure on the national currency. A sudden rise in unemployment and a notable decline in jobs have pushed AUDUSD to test a critical upward-sloping support line at 0.69500. Bearish momentum is likely to persist in the next 3 days, with a high probability of a drop toward the psychologically important floor at 0.6900.

The September report from the Australian Bureau of Statistics (ABS) shook things up. The country’s economy shed 39,300 jobs. Meanwhile, analysts had predicted an increase of 20,000. What’s worse, unemployment surged to 4.7%, a new 5-year peak.

A sharp decline in part-time employment (down 73,700 positions), which could not be offset by a 34,400 jump in full-time roles was the primary driver behind this negative release. Sadly, that’s not all: the labor force participation rate fell to 66.8%.

Until now, the Reserve Bank of Australia (RBA) had been one of the most hawkish regulators, maintaining its borrowing costs at a 15-year high of 4.60% and signaling the possibility of further tightening due to stubborn inflation. However, the suddenly cooled labor market has forced traders to reassess their positions. The probability of a rate hike at the RBA meeting on November 3 has just plunged below 20%. In other words, investors are beginning to price in the approaching sunset of the monetary tightening cycle, stripping the Australian dollar of its main fundamental advantage: elevated yields.

Given the magnitude of this fundamental disappointment, the pair is likely to continue its descent over the next 72 hours. A break below the 0.6950 support level would open the path toward the key psychological barrier at 0.6900, where a significant unwinding of short positions is expected.

The overall recommendation is to sell AUDUSD. Profits should be taken at 0.6900. Stop Loss could be set at 0.7000. The potential gain is 500 points.

The volume of the open position should be calculated so that the potential loss (protected by a Stop Loss order) does not exceed 1% of your deposit. If your account balance does not allow opening a position of this size, it is better to avoid entering the market on this signal and wait for other trade options that meet low-risk criteria.