AUD/USD, ASX 200 Outlook: Soft Aussie jobs data rattles RBA hike bets

• Aussie unemployment jumps to 4.5%, above RBA forecast
• June RBA hike bets hammered after jobs miss
• Australian three-year bond futures break higher on RBA pause bets
• AUD/USD pressured as rate support fades
• ASX 200 trying to carve out a low

April Jobs Report Gives RBA Breathing Room

Australian labour market conditions deteriorated sharply in April, giving the Reserve Bank of Australia (RBA) room to pause in June after it signalled earlier this month that its latest hike would create “space” to assess how households and businesses are responding to tighter policy settings.

Employment fell by 18,600 while unemployment jumped by 33,000, pushing the jobless rate to 4.5%, already well above the 4.2% average level the RBA expected to see across the first half of 2026. Participation also slipped, suggesting the rise in unemployment was not simply driven by more people entering the workforce.

Source: ABS

The softer report also landed just days after RBA chief economist Sarah Hunter warned that elevated capacity constraints and domestic cost pressures could amplify the inflationary impact from higher oil prices stemming from the Iran war. At face value, today’s data challenges that assessment somewhat, suggesting labour market conditions may not be as tight as previously thought.

However, the April report was not unambiguously weak with a sharp 0.9% increase in hours worked per employee, suggesting those who remained employed were working longer hours. The underemployment rate also edged down by 0.1 percentage points to 5.8% even as the unemployment rate climbed to 4.5%, an unusual divergence that may indicate firms are trimming headcount while continuing to lean heavily on existing workers.

Rate Markets Sense the End

Source: TradingView

With the RBA already signalling policy was likely restrictive following this month’s hike, the softer labour market report saw traders further scale back expectations for additional tightening near term. Market pricing for another 25bp increase at the June meeting slumped from around 15% before the release to just 6% afterwards, having been as high as 22% last week as traders reacted to rising oil prices and escalating tensions in the Gulf.

The collapse in June hike pricing has also sparked a reversal in Australian three-year bond futures, hinting rates traders are starting to question whether the RBA is done tightening after this month’s move.

Source: TradingView

The price has now broken above both the 50-day moving average and downtrend resistance, while also clearing horizontal resistance at 95.44. Momentum indicators are improving, with RSI pushing back towards 60 while MACD continues to grind higher, hinting downside momentum may be fading.

Should the break stick, attention shifts towards 95.56 initially, with a move above that level potentially opening the door for a larger squeeze higher. On the downside, former resistance near 95.44 may now provide initial support ahead of 95.195.

Aussie Dollar Reversal Risks Growing

Source: TradingView

The Australian dollar sunk like a stone against the major crosses in the wake of the jobs report, dragging AUD/USD back towards a support zone comprising the 50-day moving average and horizontal support at .7100.

With momentum indicators showing early signs of rolling over, traders should be alert to the risk of a breakdown through this zone, potentially putting the 100-day moving average, .7000 and .6964 on the radar as downside targets. If support holds, offers ahead of .7185 have repeatedly capped gains over the past week, making that a key topside level to watch.

While risk appetite remains the dominant overall driver of AUD/USD movements, rate differentials were the prevailing force behind the rebound from the mid-60 cent region late last year. That suggests today’s report could prove significant over the longer term, especially if upcoming inflation reports fail to justify recent hawkish repricing or labour market weakness is confirmed again in the May report next month.

ASX 200 Bulls Smell Opportunity

Source: TradingView

As for our ASX 200 contract, it looks like it may be in the process of putting in a market bottom, with two bearish moves beneath 8500 over the past week bought aggressively.

With RSI (14) and MACD showing signs of starting to swing higher, 8650 becomes the level to watch immediately overhead. The index stalled there earlier this week, but with rate tailwinds building and risk appetite across Asia buoyant, a break above this level could put the 50-day moving average, April downtrend and confluence of the 100 and 200-day moving averages in play for bulls.

Should the latest bounce fizzle, the long downside wicks from 8575 suggest buyers are lurking and willing to continue buying dips.