Australian dollar loses ground as traders take caution ahead of US NFP

VaselineSeptember 6, 2024

0 6 minutes read

Australian dollar loses ground as traders take caution ahead of US NFP

Aussie dollar snaps two-day winning streak despite RBA driver outlook.
RBA Governor Michele Bullock said it was too early to consider cutting rates.
US dollar extends decline following dovish Fed language.

The Australian dollar (AUD) halted its two-day run of gains against the US dollar (USD) as traders take caution ahead of the release of the US Non-Farm Payrolls (NFP). These data may provide more clues about the potential size of an expected rate cut by the Federal Reserve (Fed) this month.

The Australian dollar received support from positive trade balance data released on Thursday. In addition, Reserve Bank of Australia (RBA) Governor Michele Bullock spoke at the “Anika Foundation” in Sydney about the “Costs of High Inflation”, saying it was too early to consider rate cuts. The board does not currently anticipate being able to lower rates in the near term.

The US dollar extends its decline following dovish comments from Fed officials. However, positive key economic data may have limited the greenback’s downside. The US ISM services PMI rose to 51.5 in August from 51.4 in July, beating market expectations of 51.1.

Chicago Fed President Austan Goolsbee said on Friday that the longer-term trend in the labor market and inflation data justified easing the Fed’s interest rate policy soon and then steadily over the next year. FXStreet’s FedTracker, which rates the tone of Fed officials’ speeches on a scale of 0 to 10 using a custom AI model, rated Goolsbee’s words neutral with a score of 3.8.

Daily Digest Market Movers: Australian Dollar Depreciates Ahead of US Non-Farm Payrolls

ADP Employment Change showed on Thursday that private sector employment rose by 99,000 in August, after July’s increase of 111,000 and below the estimate of 145,000. Meanwhile, initial weekly US jobless claims rose to 227,000 for the week ended August 30, compared with the previous reading of 232,000 and below the initial consensus of 230,000.
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.
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%.
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: Aussie holds position above 50-day EMA near 0.6700

The Australian dollar is trading around 0.6740 on Friday. On the daily chart, the AUD/USD pair is positioned below the nine-day exponential moving average (EMA), indicating a short-term bearish trend. However, the 14-day Relative Strength Index (RSI) is just above 50, suggesting a possible upward bias. A drop below the RSI’s 50 level could confirm a bearish shift.

On the downside, AUD/USD could test immediate support around the 50-day EMA at 0.6716. A break below this level could reinforce the bearish trend and lead the pair to navigate the region around 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 is testing the nine-day EMA at 0.6743. A break above this level could open the door for a potential retest of the seven-month high at 0.6798.

AUD/USD: Daily chart

Australian Dollar PRICE Today

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

	USD	EURO	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.01%	0.02%	-0.13%	-0.03%	0.05%	0.03%	-0.04%
EURO	0.01%		0.03%	-0.13%	-0.04%	0.06%	0.03%	-0.03%
GBP	-0.02%	-0.03%		-0.13%	-0.05%	0.04%	0.00%	-0.06%
JPY	0.13%	0.13%	0.13%		0.09%	0.19%	0.14%	0.08%
CAD	0.03%	0.04%	0.05%	-0.09%		0.08%	0.06%	-0.01%
AUD	-0.05%	-0.06%	-0.04%	-0.19%	-0.08%		-0.04%	-0.11%
NZD	-0.03%	-0.03%	-0.01%	-0.14%	-0.06%	0.04%		-0.07%
CHF	0.04%	0.03%	0.06%	-0.08%	0.00%	0.11%	0.07%

The heatmap shows the percentage changes of major currencies against each other. The base currency is chosen from the left column, while the quoted currency is chosen from the top row. For example, if you choose the Australian dollar in the left column and move along the horizontal line to the US dollar, the percentage change shown in the box will be AUD (base)/USD (quote).

Australian Dollar FAQ

One of the most important 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 factor is the price of its biggest export, iron ore. The health of the Chinese economy, its largest trading partner, is a factor, as is Australia’s inflation, growth rate and trade. Balance. Market sentiment – whether investors are taking riskier assets (risk-on) or seeking safe havens (risk-off) – is also a factor, with risk positive for the AUD.

The Reserve Bank of Australia (RBA) influences the Australian dollar (AUD) by setting the level of interest rates at which Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main aim 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 is relatively low. The RBA can also use quantitative easing and tightening to influence lending conditions, the former AUD-negative and the latter AUD-positive.

China is Australia’s largest trading partner, so the health of the Chinese economy has a major influence on the value of the Australian dollar (AUD). When the Chinese economy is doing well, it buys more raw materials, goods and services from Australia, increasing 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. Therefore, positive or negative surprises in China’s growth data often have a direct impact on the Australian dollar and its pairs.

Iron ore is Australia’s biggest export, accounting for $118 billion a year, according to 2021 data, with China as the main destination. Therefore, the price of iron ore can be a driver of the Australian dollar. Generally, if the price of iron ore rises, so does the AUD, as aggregate demand for the currency rises. The opposite is true if the price of iron ore falls. Higher iron ore prices also tend to result in a higher likelihood of a positive trade balance for Australia, which is also positive for the AUD.

The balance of trade, 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 only gain in value from the excess demand created by foreign buyers wanting to buy its exports over what it spends on buying its imports. A positive net trade balance therefore strengthens the AUD, with the opposite effect if the trade balance is negative.

VaselineSeptember 6, 2024

0 6 minutes read