Australian Dollar trims profits due to risk aversion as US NFP looms

The Australian Dollar offers gains as investors adopt caution before the release of the US NFP on Friday.
The Australian Bureau of Statistics reported a Trade Balance figure of 6,548 million MoM in May, surpassing the expected 5,500 million.
The US Dollar may struggle as Wednesday's mixed data fuel rate cut speculations by the Fed.

Akhtar Faruqui FXStreet

The Australian Dollar (AUD) retraces its daily gains on Thursday. This could be possibly attributed to traders adopting a cautious stance ahead of the release of US employment data releases on Friday, including the Average Hourly Earnings and Nonfarm Payrolls. The AUD/USD pair was strengthened during the earlier hours after the Trade Balance data release in Australia, which widened to 6,548 ($ 4,321.68) million MoM in May, exceeding the expected 5,500 million and April's balance of 5,024 million. Australia’s Imports plunged by 7.2% MoM in May, swinging from April’s 4.2% increase. Exports shrank 2.5% following the previous decline of 0.6%.

The Australian Dollar could appreciate due to a hawkish statement by Reserve Bank of Australia (RBA) Governor Michele Bullock on Wednesday. Bullock indicated that the central bank is prepared to increase interest rates if the Consumer Price Index (CPI) does not return to the target range of 1%-3%. She also acknowledged that the labor market is easing on several measures, as reported by NCA NewsWire.

The US Dollar (USD) may struggle as mixed economic data from the United States (US), fueling interest rate cut speculation by the US Federal Reserve (Fed). As per the CME FedWatch Tool, the probability of a Fed rate cut by at least 25 basis points has increased to nearly 70.0%, up from 47.5% a week earlier. The depreciation of the US Treasury yields is putting pressure on the Greenback.

Daily Digest Market Movers: Australian Dollar depreciates due to risk aversion

On Wednesday, the ISM US Services PMI soared to 53.8 in May, marking its highest level in nine months and significantly surpassing the forecast of 50.8. In contrast, the ADP US Employment Change report showed that 152,000 new workers were added to payrolls in May, the lowest in four months and well below the forecast of 175,000 and the downwardly revised figure of 188,000 for April.
Australia's Gross Domestic Product (GDP) was released on Wednesday, which grew 0.1% in the first quarter, against the expected 0.2% reading. On an annual basis, the economy grew 1.1%, slightly below the expected 1.2%.
Judo Bank Purchasing Managers Index (PMI) came in at 52.5, lower than the expected reading of 53.1 for May. Meanwhile, Judo Bank Composite PMI recorded a reading of 52.1 in May, a slight decrease from 53.0 in April. This shows that Australia's private sector output continued to grow for the fourth consecutive month, though at a slower rate.
Caixin China Services PMI came in at 54.0 in May, surpassing expectations of 52.6 and the previous figure of 52.5. This marked the 17th consecutive month of expansion in services activity, indicating the fastest pace since July 2023. Any change in the Chinese economy could impact the Australian market as both countries are close trade partners.
Last week, Atlanta Fed President Raphael Bostic remarked in an interview with Fox Business that he doesn't believe further rate hikes should be required to reach the Fed's 2% annual inflation target. Additionally, New York Fed President John Williams stated that inflation is still too high but should moderate over the second half of 2024. Williams doesn't feel the urgency to act on monetary policy, per Reuters.

Technical Analysis: Australian Dollar hovers around 0.6650

The Australian Dollar trades around 0.6670 on Thursday. Analysis of the daily chart shows a bullish bias for the AUD/USD pair, as it remains within a rising wedge pattern. This bullish bias is further supported by the 14-day Relative Strength Index (RSI), which is above the 50 level.

Potential upside targets for the AUD/USD pair include the psychological level of 0.6700, the four-month high of 0.6714, and the upper limit of the rising wedge around 0.6750.

On the downside, immediate support is at the 21-day Exponential Moving Average (EMA) at 0.6634, which aligns with the lower boundary of the rising wedge. Additional support is found at the psychological level of 0.6600. A further decline could pressure the AUD/USD pair towards the throwback support region at 0.6470.

AUD/USD: Daily Chart

Australian Dollar price today

The table below shows the percentage change of the Australian Dollar (AUD) against listed major currencies today. The Australian Dollar was the weakest against the Swiss Franc.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		-0.05%	0.04%	0.03%	0.11%	0.09%	0.17%	-0.11%
EUR	0.05%		0.11%	0.08%	0.15%	0.14%	0.23%	-0.05%
GBP	-0.04%	-0.08%		-0.03%	0.06%	0.06%	0.14%	-0.15%
CAD	-0.03%	-0.07%	0.04%		0.08%	0.09%	0.15%	-0.13%
AUD	-0.10%	-0.15%	-0.06%	-0.08%		-0.02%	0.07%	-0.22%
JPY	-0.10%	-0.12%	-0.06%	-0.07%	-0.01%		0.07%	-0.21%
NZD	-0.17%	-0.25%	-0.14%	-0.16%	-0.07%	-0.09%		-0.28%
CHF	0.09%	0.05%	0.14%	0.12%	0.20%	0.20%	0.27%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Economic Indicator

Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

Why it matters to traders?

America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.

Author

Akhtar Faruqui

FXStreet

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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