• AUD/USD edges up, buoyed by Fed's rate talk and mixed US data.
  • Fed's data-focused rate policy, strong US job market, and services data are headwinds for the US Dollar.
  • Australia's services sector gains boost AUD amid global economic uncertainties.

The Aussie Dollar posted solid gains against the US Dollar on Wednesday, boosted by falling US Treasury yields and a soft US Dollar. Federal Reserve policymakers grabbed the headlines, while US economic data was mixed, with a strong ADP report but softer PMIs. The AUD/USD trades at 0.6565, posting minimal gains of 0.02% early during Thursday’s Asian session.

AUD/USD sees slight uptick as dovish Federal Reserve remarks and uneven US data fuel optimism in Forex markets

On Wednesday, the market was attentive to the remarks of Fed Chair Jerome Powell, who reiterated the US central bank's readiness to cut rates, albeit with a data-dependent approach. Atlanta Fed President Raphael Bostic's statement, supporting a rate cut in the last quarter of 2024, also drew significant attention.

Lately, Adriana Kugler, one of the newest Fed Governors appointed to the board, stated that the disinflation process would continue, and that would warrant lowering rates at least three times toward the last quarter of 2024.

The Aussie Dollar also benefited from an upbeat market mood as Wall Street snapped two days of losses. US Treasury yields finished flat, a headwind for the American currency. The US Dollar Index (DXY) tumbles more than 0.50%, down to 104.22.

Elsewhere, the March ADP report revealed that private hiring increased by 184K, exceeding estimates and forecasts. In the meantime, the US S&P Global and the ISM Services PMIs, were a touch softer.

In the meantime, Aussie’s data revealed the Judo Bank Services PMI improved from 53.5 in February to 54.4 in March. The report highlighted “This is the fourth consecutive month of improvement, with the services output index increasing by 8.4 points, the largest gain in the series outside of recovery from lockdowns.”

AUD/USD Price Analysis: Technical outlook

From a technical perspective, the AUD/USD shifted to a neutral-upward bias. A ‘bullish harami’ candlestick chart pattern, followed by Wednesday’s large candle breaching the 200-day moving average (DMA) at 0.6543, could pave the way to challenge the 100-DMA at 0.6597, ahead of the 0.6600 mark. The momentum has shifted in favor of the bulls, as the Relative Strength Index (RSI) turned bullish and aims higher.

On the other hand, a drop below the 200-DMA could expose the 0.6500 figure.

 

Australian Dollar FAQs

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD retreats below 1.0650 after upbeat US data

EUR/USD retreats below 1.0650 after upbeat US data

EUR/USD lost its traction and declined below 1.0650 in the early American session on Monday. The upbeat Retail Sales data from the US helped the US Dollar regather its strength and caused the pair to turn south.

EUR/USD News

USD/JPY sits at multi-decade high near 154.00 as Japan's intervention risks loom

USD/JPY sits at multi-decade high near 154.00 as Japan's intervention risks loom

USD/JPY is sitting at multi-decade highs shy of 154.00 in the European session on Monday. The Japanese Yen continues to be undermined by the BoJ’s uncertain outlook about future rate hikes. Intervention fears and persistent geopolitical tensions could help limit losses for the safe-haven JPY. 

USD/JPY News

Gold continues to fluctuate at around $2,350

Gold continues to fluctuate at around $2,350

Following a bullish opening to the week, Gold went into a consolidation phase at around $2,350 on Monday. The benchmark 10-year US Treasury bond yield is up nearly 2% after strong US data, not allowing XAU/USD to push higher.

Gold News

XRP price recovers from nearly eleven month low of $0.41 as developers propose native lending on XRPLedger

XRP price recovers from nearly eleven month low of $0.41 as developers propose native lending on XRPLedger

Ripple price recovered from weekend low of $0.4188, surged past $0.50 on Monday. XRPLedger developers have proposed a Native Lending Protocol to help Ripple establish a foothold in DeFi, lending and borrowing for users. 

Read more

Week ahead: Data from the US, UK and Canada in focus

Week ahead: Data from the US, UK and Canada in focus

Similar to Fed and ECB pricing, swaps traders have scaled back bets of rate cuts for the Bank of England (BoE’s) Bank Rate to below 50bps for the year.

Read more

Forex MAJORS

Cryptocurrencies

Signatures