The Australian dollar fell sharply against the U.S. dollar on Thursday, updating local price lows. The decline is driven not only by the overall strengthening of the greenback but also by weakness in the Aussie, which reacted negatively to the labor market data published earlier on Thursday.

The negative response from the Aussie is fully justified, as nearly all components of the release came in "in the red," reflecting a broader cooling in Australia's labor market. The report increases the likelihood of an interest rate cut by the Reserve Bank of Australia (RBA) as early as August, despite the cautious stance taken by the central bank during its most recent meeting in June.

According to the released data, Australia's unemployment rate rose to 4.3% in June after three consecutive months at 4.1%. This is a nearly four-year high — the highest level since November 2021. Most analysts had expected the rate to remain unchanged at 4.1%.

The number of unemployed rose by 33,600 people, while employment grew by only 2,000 — well below the forecast of +21,000. Although this figure remained in positive territory (employment had declined by 1,100 in the previous month), its internal structure reveals some troubling trends. In May, full-time employment rose by 42,000 while part-time employment dropped by 43,000. In June, the picture was reversed: full-time jobs fell by 38,200, while part-time jobs increased by 40,200. As is well known, full-time positions typically offer higher wages and greater social security compared to part-time or temporary jobs. Therefore, this component of the "Australian NonFarms" signals unhealthy trends in the labor market.

Given this imbalance, it's not surprising that the total number of hours worked across the Australian economy declined by 0.9%. This is yet another signal that real employment is weakening, even if the headline employment figure remained technically positive.

Overall, the June report indicates that labor market pressures in Australia are easing. The sharp drop in full-time employment alongside a comparable rise in part-time jobs points to growing instability. Also noteworthy is the rise in youth unemployment (ages 16–24), which increased from 9.5% to 10.4%. This is another alarming sign that is unlikely to be ignored by RBA policymakers.

It's important to recall that during its June meeting, the RBA unexpectedly left all monetary policy parameters unchanged, while most analysts had expected a 25-basis-point rate cut. At the post-meeting press conference, RBA Governor Michele Bullock reiterated several times that the easing cycle was not over — and not even on pause. According to her, the central bank is still on a path toward policy easing; the only question is the pace of rate cuts. In that context, she added that "a cautious and gradual approach is appropriate" given the current circumstances.

Moreover, the RBA governor effectively linked the future of interest rates to both inflation trends ("a further rate cut may be expected if inflation slows") and the condition of the labor market.

One could say this puzzle is nearly complete: the labor market has shown a notable decline after several months of stability. All that remains is the final piece — this time in the form of inflation data. The RBA primarily focuses on quarterly figures, so the Q2 CPI report — tentatively due on July 30 — will likely determine the fate of interest rates ahead of the August meeting.

Even after the release, the probability of an August rate cut has increased significantly. Therefore, the AUD/USD downtrend appears fully justified.

From a technical perspective, the pair is testing the lower Bollinger Bands line (0.6470) on the four-hour chart, trading below all lines of the Ichimoku indicator, which has formed a bearish "Parade of Lines" signal. On the daily chart, the Aussie is trading between the middle and lower Bollinger Bands lines, testing the upper boundary of the Kumo cloud. If AUD/USD bears push below the 0.6470 support level, the next downside target will be 0.6400 — the middle line of the Bollinger Bands on the weekly (W1) timeframe.