Market Data 
- AUD/USD climbs 0.09%, buoyed by strong Australian jobs data and weaker US employment.
- Australian jobs grow by 50.2K, beating forecasts; Unemployment Rate slightly up at 4.1%.
- US Jobless Claims rise to 243K, hinting at labor market slack and promoting a risk-on mood.
The Australian Dollar extended its gains on Thursday after data from the United States (US) showed the labor market continues to cool, following last week’s Initial Jobless Claims (IJC) report. Therefore, the AUD/USD pair trades at 0.6734, gaining 0.09%.
AUD/USD advances on strong Aussie’s jobs data
US equity futures point to a positive start, depicting a risk-on environment. This helps the high-beta status of the Aussie Dollar, which was boosted during the Asian session after posting a strong jobs report.
The Australian Bureau of Statistics (ABS) revealed that Employment Change increased by 50.2K, exceeding estimates of 20K and May’s 39.5K reading. Nonetheless, the Unemployment Rate ticked higher from 4% to 4.1%.
The data would test the Reserve Bank of Australia’s (RBA) patience, as mentioned by TD Analysts in a note: “With measures of inflation continuing to track higher since the start of this year and the labour market holding up better than expected, the RBA’s patience to remain on hold is likely to be tested.”
Aside from this, the recently released IJC report shows “some slack” in the US labor market. The number of Americans filing for unemployment benefits in the week ending July 13 rose above estimates of 230K, coming at 243K, and exceeded the previous week’s reading of 223 K.
AUD/USD Price Analysis: Technical outlook
From a technical standpoint, the AUD/USD uptrend stays intact, yet the dip from yearly highs of 0.6798 toward the current exchange rate has opened the door to testing the May 4 high, which turned support at 0.6714.
Further US Dollar strength could push the pair below 0.6700, opening the door to challenge the 50-day moving average (DMA) at 0.6667, ahead of the 100-DMA at 0.6603. On the other hand, if buyers keep the AUD/USD exchange rate above 0.6700, that could pave the way for testing the YTD high at 0.6793.
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.
