Australian dollar appreciates after Trade Balance data, RBA Bullock speech awaited

• The Australian dollar continues to face downward pressure following the release of trade balance data on Thursday.
• Australia’s trade balance recorded a monthly surplus of 6,009 million in July, compared with expectations of 5,150 million.
• The US dollar received downward pressure following recent unfavorable economic data.

The Australian dollar (AUD) inches higher against the US dollar (USD) after the release of Thursday’s trade balance data. Australia’s trade surplus widened to 6.009 million on the month in July, beating expectations of 5.150 million and 5.589 million in the previous reading. Traders await a speech by Reserve Bank of Australia (RBA) Governor Michele Bullock later in the day.

The Australian dollar came under downward pressure as recent figures showed Australia’s Gross Domestic Product (GDP) rose in the second quarter but was below market expectations. A private survey also showed the country’s manufacturing activity remained contractionary in August, extending the sector’s deterioration to two years.

The US dollar depreciated after July US JOLTS job offers came in below expectations, signaling a further slowdown in the labor market. In addition, the ISM Manufacturing PMI showed that factory activity contracted for the fifth month in a row.

Traders now await US ISM PMI services and initial jobless claims scheduled for release on Thursday. Attention will turn to Friday’s US Non-Farm Payrolls (NFP) for more clues on the potential size of a rate cut expected by the Fed this month.

Daily Digest Market Movers: Australian dollar appreciates on widening trade surplus

• Atlanta Federal Reserve President Raphael Bostic said on Wednesday that the Fed was in a favorable position, but added that it should not maintain a tight policy stance for too long, according to Reuters. FXStreet’s FedTracker, which rates the tone of Fed officials’ speeches on a scale of 0 to 10 using a custom AI model, rated Bostic’s words as neutral with a score of 4.6.
• US JOLTS job openings fell to 7.673 million in July, down from 7.910 million in June, marking the lowest level since January 2021 and below market expectations of 8.10 million.
• Bank of America (BoA) revised its economic growth forecast for China, lowering its 2024 projection to 4.8% from 5.0% previously. For 2025, the forecast is adjusted to 4.5% growth, while the outlook for 2026 remains unchanged at 4.5%.
• China’s Services Purchasing Managers’ Index (PMI) fell from 52.1 in July to 51.6 in August, which is remarkable given the close trade relationship between China and Australia.
• Australia’s Gross Domestic Product (GDP) posted a 0.2% QoT reading for the second quarter, up from 0.1% in the previous quarter, but below expectations of 0.3%.
• The Judo Bank Composite PMI rose to 51.7 in August from 51.4 in July, signaling the fastest expansion in three months. This increase was fueled primarily by an increase in services activity, with the Services PMI reaching 52.5 in August, up from 52.2 in July, marking the seventh consecutive month of growth in the services sector.
• The US ISM manufacturing PMI rose to 47.2 in August from 46.8 in July, below market expectations of 47.5. This marks the 21st contraction in US factory activity in the past 22 months.

Technical analysis: Australian dollar holds ground above 0.6700

The Australian dollar is trading around 0.6720 on Thursday. Looking at the daily chart, the AUD/USD pair is positioned below the nine-day exponential moving average (EMA), suggesting a short-term bearish trend. However, the 14-day Relative Strength Index (RSI) has moved above the 50 level, suggesting that the asset price is leaning towards the bullish side.

On the downside, AUD/USD could test the retracement level around 0.6575, with a deeper decline potentially targeting lower support around 0.6470.

In terms of resistance, the AUD/USD pair may first encounter the immediate barrier at the 14-day EMA around 0.6731, followed by the nine-day EMA at 0.6742. A break above these levels could pave the way for a test of the seven-month high at 0.6798.

AUD/USD: Daily chart