Soil compaction is widely recognised as one of the key contributors to soil degradation in Europe. Information is needed for farmers and land managers to guide management decisions and prevent traffic-induced soil compaction. Predicted soil moisture deficit (SMD) from the hybrid SMD model may provide information on when soil conditions are suitable for machinery trafficking. The objective of this study was to investigate the relationship between soil water content and traffic induced soil compaction and if a predicted SMD threshold level could be identified, above which soils can be trafficked without significant soil compaction occurring. The study also evaluated the capacity of selected soil physical indicators such as soil bulk density and water stable aggregates to indicate soil physical degradation across a range of soil water contents. The experiment was carried out on grassland with moderately drained soil, located in Wexford, Ireland. Machinery trafficking of the soil with a tractor equipped with a fully loaded slurry tanker, was assessed in the field across the four seasons of the year. Traffic was imposed at target predicted SMD + 10 mm (relatively dry soil), 0 mm (relatively moist soil), and −10 mm (relatively wet soil). After each traffic event, samples were taken in the middle of the wheel track at three depths (0–10, 10–20 and 20–30 cm) to assess soil bulk density. Water aggregate stability was evaluated at the same three depths following the fourth traffic event. Results showed that when planning field machinery operations, especially repeated trafficking events, soil becomes prone to physical degradation when predicted SMD ≤ 0 mm. Traffic on soil at predicted SMD 0 mm (close to field capacity) lead to compaction after two traffic events. However, when predicted SMD was −10 mm, soil bulk density indicated no significant difference from the non-trafficked soil. When water-stable aggregates were measured on the predicted SMD 0 mm and −10 mm trafficked soils, it indicated physical degradation of soil. Hence, bulk density alone did not give an accurate indication of soil structural quality when soils where trafficked under relatively wet or saturated conditions (SMD −10 mm). These results indicate that avoiding machinery trafficking of grassland soils at predicted SMD ≤ 0 mm will help protect soil physical structure. On soils where multiple machinery operations are likely to occur over the year, trafficking when the predicted SMD > 0 mm is recommended to minimise loss of soil physical quality.