Australian Dollar remains steady following China’s Trade Balance data

• AUD/USD moves little as China's August Trade Balance came in at $119.09 billion, almost in line with $119.1 billion.
• Westpac Consumer Confidence index fell 5.2% in September, from August's 6% surge.
• The US Dollar may find support amid rising Fed rate hike bets in September.

AUD/USD halts its four-day winning streak, trading around 0.7210 during Asian hours on Tuesday. The pair holds ground following the release Trade Balance data from China, Australia’s close trading partner.

China's Trade Balance, in US Dollar (USD) terms, arrived at $119.09 billion for August, almost in line with $119.1 billion estimates, but higher than the July reading of $112.5 billion. Exports surged 25% year-over-year (YoY) in August, as expected, faster than the previous reading of 23.9%. The country’s imports rose 28.2% YoY in the same period, slower than expectations of 30%. In July, Imports grew by 27.5%.

However, the AUD/USD pair depreciated as the Australian Dollar (AUD) faced pressure from a sharp decline in domestic consumer sentiment. The Westpac Consumer Confidence index dropped 5.2% to 84.4 in September, reversing August's 6% surge to 88.9.

Matthew Hassan, Westpac’s Head of Australian Macro-Forecasting, highlighted that a downturn in the housing market is increasingly weighing on homeowner sentiment. Nearly two-thirds of consumers now anticipate rising mortgage rates, while growing job insecurity, particularly among construction and hospitality workers, continues to dent confidence.

However, further losses for the AUD/USD pair may be limited by broad-based weakness in the US Dollar (USD). HSBC added a note of caution to the recent stabilisation in the Dollar, warning that broader structural issues have not disappeared. Analysts at the bank stress that they "remain cautious about broader structural concerns, especially around US fiscal sustainability," and caution that these worries "could still return and weigh on the dollar yet again" even if near-term sentiment has improved.

Despite its recent decline, the Greenback could find support as market participants price in a greater than 60% chance of a Federal Reserve (Fed) rate hike in September. This shift follows a stronger-than-expected August US jobs report, which showed Nonfarm Payrolls adding 162,000 jobs while the Unemployment Rate remained steady. Market focus now shifts to the upcoming US Producer Price Index and Consumer Price Index inflation reports due later this week for further clues on monetary policy.

Technical Analysis: AUD/USD holds above moving averages

In the daily chart, AUD/USD trades at 0.7210, maintaining a constructive bullish bias as it holds above both the nine- and 50-day Exponential Moving Averages (EMAs). This configuration, with price perched over short- and medium-term trend measures, suggests buyers remain in control, while the 14-day Relative Strength Index (RSI) around 66 points to firm yet not extreme upside momentum, indicating scope for further gains before overbought conditions emerge.

On the downside, initial support is seen at the nine-day EMA near 0.7187, with additional demand expected around the 50-day EMA at 0.7094 if a deeper pullback unfolds. Below there, more distant structural floors align at 0.6688, 0.6434, and 0.6348, levels that would only come into focus if the current bullish structure unwinds markedly.

(The technical analysis of this story was written with the help of an AI tool. Know more.)