AUD/JPY Falls Below 96.50 as Australia’s Unemployment Hits 3.5-Year High

AUD/JPY Falls Below 96.50 as Australia’s Unemployment Hits 3.5-Year High

The AUD/JPY pair dipped to around 96.35 in early Thursday Asian trading, down by 0.18% on the day, following the release of weaker-than-expected Australian labor data. The sell-off in the Australian Dollar (AUD) comes as Australia’s unemployment rate surged to 4.3% in June — the highest level in more than three years.

Australia’s Unemployment Jump Fuels RBA Rate Cut Bets

According to data from the Australian Bureau of Statistics (ABS), the country’s unemployment rate increased to 4.3% in June, up from 4.1% in May and above the market forecast of 4.1%. This marks the highest jobless rate since late 2021 and fuels speculation that the Reserve Bank of Australia (RBA) may begin cutting interest rates as early as August.

“The back-to-back weak jobs prints and the steep lift-off in the unemployment rate to 4.3% is probably going to spook the RBA,” said Alex Loo, macro strategist at TD Bank. “Investors are probably going to read that the RBA would consider consecutive cuts in August and September now.”

While employment numbers rose overall, with part-time jobs increasing, the sharp rise in unemployment reflects growing slack in the labor market, weakening the AUD.

BoJ Policy Outlook and Political Risk Cap JPY Upside

Meanwhile, the Japanese Yen (JPY) remains under moderate pressure, as investors question the near-term prospects of a Bank of Japan (BoJ) rate hike. The BoJ’s cautious approach, combined with slowing growth and looming political risks, is likely to prevent the JPY from rallying significantly.

The market is also eyeing Japan’s National CPI data for June, due Friday, for additional direction.

Adding to the uncertainty, political developments could affect BoJ policy independence. Prime Minister Shigeru Ishiba’s government is at risk of losing control of the upper house in Sunday’s vote. If opposition gains momentum, bond yields may rise, limiting the BoJ's ability to normalize rates without market backlash.

AUD/JPY Technical Outlook

With a break below 96.50, the pair is now vulnerable to further downside. The next key support lies near 96.00, while resistance is seen at 96.70. Market direction will depend on upcoming Japan inflation data and broader risk sentiment related to global monetary policy.

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