AUD/USD remains under pressure ahead of key data releases
- The AUD/USD pair is trading around 0.6400, down 0.65% on the day.
- The US Dollar is seeing mixed movement as markets react to trade policy uncertainty and labor data.
- Investors await US GDP and NFP data this week for clues on the Federal Reserve’s policy direction.
- Market attention shifts to US job openings and the potential for a rate cut in June.
The AUD/USD pair is struggling near the 0.6400 level as trade policy uncertainty continues to impact sentiment. Investors are awaiting critical data this week, including the US Nonfarm Payrolls (NFP) and GDP figures, which could influence the Federal Reserve’s (Fed) stance on interest rates. The trade war and concerns over inflation remain key factors driving market uncertainty.
Daily digest market movers: US data, tariffs weigh on sentiment
- The AUD/USD pair slips after testing resistance near 0.6450, as uncertainty around US trade policy impacts risk sentiment.
- US Treasury Secretary Scott Bessent’s comments on trade policy delays added to market unease.
- President Trump’s plans to ease tariffs on auto imports failed to spark significant market movement.
- The JOLTS report showed softening labor demand, with job openings falling to 7.19 million, missing expectations.
- US consumer confidence continued to slide, with the Conference Board’s Index falling to its lowest since 2020.
- Expectations for a Fed rate cut in June rise after softening labor and confidence data.
- The US Dollar Index (DXY) remains near 99.16, up slightly on the day, amid cautious optimism for a trade thaw.
- Market mood remains cautiously positive as US equities show slight gains despite tariff-related uncertainties.
- Traders are focused on the upcoming US GDP report, with the market expecting weak growth due to trade friction.
- In Australia, CPI data for Q1 is due this week, with expectations for cooling inflation.
- US trade data, including the Goods Trade Balance, remains in focus amid trade negotiations with China and other partners.
- President Trump’s tariff policies continue to weigh on the US Dollar as the global trade landscape remains uncertain.
Technical Analysis: AUD/USD faces resistance at 0.6450, bullish trend intact
The AUD/USD pair is trading around 0.6400, down 0.65% on the day. Price action remains range-bound between 0.6376 and 0.6450. The Relative Strength Index (RSI) is neutral at 55.98, while the Moving Average Convergence Divergence (MACD) continues to generate a buy signal. However, short-term momentum is bearish, with the 10-day momentum at 0.0043. The Commodity Channel Index (CCI) is neutral at 69.64. Short-term moving averages are bullish, with the 10-day EMA at 0.6373 and the 100-day SMA at 0.6282, supporting the overall bullish outlook. Resistance is found at 0.6450, and the 200-day SMA at 0.6464 remains a key hurdle. Support levels are identified at 0.6373, 0.6336, and 0.6336, with the pair likely to continue testing resistance.
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.
Author
Patricio Martín
FXStreet
Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.
