- AUD/USD trades near the 0.6270 region, failing to recover ground amid persistent USD strength.
- A soft Australian labor market report and safe-haven demand for the US Dollar continue to weigh on the Aussie.
- Technical indicators point to further downside as the pair remains below key moving averages.
The AUD/USD pair remained depressed during the American session below the 0.6300 barrier as a stronger US Dollar (USD) and disappointing employment data from Australia continued to weigh. Technical signals have turned increasingly bearish, as indicators deteriorate and price action breaks below important moving averages.
Daily digest market movers: Australian Dollar softens as US Dollar stays firm post-Fed
- The Australian Dollar (AUD) extended losses for a second session on Friday, pressured by both external and domestic drivers.
- The release of a disappointing Australian jobs report, which showed the economy shed 52.8K positions in February, well below expectations for a 30K increase, sparked fresh concerns about labor market weakness.
- The US Dollar built on its mid-week rebound, driven by expectations that the Federal Reserve (Fed) will keep interest rates elevated for longer, following higher inflation projections in the latest Summary of Economic Projections.
- Although the Fed kept its policy rate unchanged, the updated tone leaned more hawkish, providing a lift to the Greenback.
- Geopolitical tensions and persistent uncertainty over US trade policy also added to safe-haven flows, benefitting the US Dollar.
- Comments from US President Donald Trump about potential new tariffs and retaliatory trade measures have kept investors cautious, a factor that particularly affects risk-sensitive currencies like the Aussie, given Australia’s heavy trade exposure to China.
- From a domestic monetary policy perspective, the weak employment data increases the likelihood of further easing from the Reserve Bank of Australia (RBA). The RBA had already cut rates by 25 basis points in February, and analysts now speculate up to 75 basis points of additional easing could be warranted if economic data continues to disappoint.
AUD/USD Technical Analysis: Negative momentum deepens with key levels breached
The AUD/USD pair continued to move lower during Friday’s American session, hovering near the 0.6270 support zone, with bearish pressure dominating the day. The pair remains firmly below the 20-day and 100-day Simple Moving Averages, confirming a deteriorating technical structure.
The Moving Average Convergence Divergence (MACD) indicator printed a new red bar, while the Relative Strength Index (RSI) dropped sharply to 44, staying within negative territory. Both signals point to momentum continuing to favor the downside.
In terms of key levels, immediate support is seen around 0.6250, and a break below could trigger a further decline toward 0.6200. On the upside, resistance lies near 0.6310, followed by a more significant barrier at 0.6340, where the pair might face selling pressure.\
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.
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