Market Data 
- The Australian Dollar faced headwinds amid slower progress on US-China trade talks.
- US Dollar strength pushed the Aussie lower, despite positive global sentiment.
- Economic uncertainty continues, with key inflation and job data releases ahead.
- Market focus remains on the US Federal Reserve’s next moves and global trade resolutions.
The Australian Dollar (AUD) faced some pressure in the market after disappointing progress on US-China trade negotiations. Although the global risk environment remains positive, tariffs and trade policy concerns impact the Aussie’s movement. Investors are now awaiting key US data for further direction.
Daily digest market movers: No progress on US and Chinese talks
- The Australian Dollar struggles as trade uncertainties between the US and China weigh on market sentiment.
- The US Dollar (USD) remains strong, continuing to impact other currencies, including the Australian Dollar.
- Traders are cautious ahead of the upcoming inflation data release from the US, which is expected to influence market moves.
- Despite positive global market sentiment, the Aussie remains under pressure, with limited domestic catalysts.
- Global commodity prices saw a slight uptick, but the Aussie failed to capitalize on the gains.
- The Reserve Bank of Australia (RBA) remains in a holding pattern, watching international developments closely.
- Key economic data, such as Australian employment figures, are expected next week, with markets watching for surprises.
- The US-China trade talks are still a major focus, with little concrete progress on tariffs.
- Global markets have a general risk-off mood, curbing appetite for risk-sensitive currencies like the Aussie.
- The Australian Dollar continues to track the broader movements of the US Dollar in the absence of strong domestic drivers.
- China’s economic outlook remains uncertain, impacting demand for Australian exports and putting further pressure on the Aussie.
- Commodity-linked currencies, including the Australian Dollar, are seeing mixed performances amid the global economic outlook.
- The Australian Dollar’s next key test will be the release of upcoming economic data, particularly job and inflation numbers.
Technical Analysis
The Australian Dollar is showing some bearish signals as it trades near 0.6400. The Relative Strength Index (RSI) remains neutral at 53.11, while the Moving Average Convergence Divergence (MACD) continues to indicate a buy signal, suggesting a potential for upward movement. The key support levels are 0.6394, 0.6385, and 0.6376, with resistance at 0.6413, 0.6418, and 0.6423. Moving averages also suggest a mixed outlook, with the 20-day SMA (0.6394) supporting bullish movement, while the 200-day SMA (0.6461) is bearish. The Australian Dollar remains range-bound, with traders focusing on the upcoming economic releases for direction.
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.
