AUD/USD Price Forecast: Bears await 0.6850 confluence break as focus remains on NFP

AUD/USD struggles to gain any meaningful traction as traders seem hesitant ahead of the US NFP.
The bearish technical setup backs the case for an extension of the pullback from a four-year high.
A convincing break below the 200-day SMA/50% Fibo. confluence will reaffirm the negative bias.

Haresh Menghani FXStreet

The AUD/USD pair seesaws between tepid gains/minor losses through the Asian session on Thursday as traders opt to wait on the sidelines ahead of the crucial US Nonfarm Payrolls (NFP) report. Spot prices currently hover around the 0.6900 mark, nearly unchanged for the day, and remain close to a three-month low, touched on Tuesday.

From a technical perspective, the range-bound price action witnessed over the past week or so might be categorized as a bearish consolidation phase against the backdrop of the recent retracement slide from a multi-year peak. The AUD/USD pair, however, holds above the 200-day Simple Moving Average (SMA). The said support coincides with the 50% Fibonacci retracement level of the November-May upswing and should act as a key pivotal point.

Despite this modest structural support, momentum remains fragile as the Relative Strength Index near 31 hints at lingering downside pressure while the Moving Average Convergence Divergence (MACD) stays negative. This, in turn, suggests that any recovery attempts could be gradual rather than impulsive. On the topside, immediate resistance emerges at the 38.2% Fibo. at 0.6955, ahead of a more significant barrier at the 23.6% level near 0.7081.

On the downside, initial support is reinforced by the 0.6853 confluence, while deeper cushions align at 0.6751 and 0.6606, where lower Fibonacci supports could attract buyers if the AUD/USD pair slides further. Nevertheless, a convincing break below the 200-day SMA/50% retracement level will be seen as a fresh trigger for bearish traders and pave the way for a further near-term depreciating move.

(The technical analysis of this story was written with the help of an AI tool.)

AUD/USD daily chart

Australian Dollar FAQs

What key factors drive the Australian Dollar?

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.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

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.

How does the health of the Chinese Economy impact the Australian Dollar?

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.

How does the price of Iron Ore impact the Australian Dollar?

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.

How does the Trade Balance impact the Australian Dollar?

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.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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