Australian Dollar remains steady following Trade Balance data

• Australian Dollar stays silent after the Trade Balance data was released on Thursday.

• Australia's Trade Surplus widened to 3,938 MoM in September, surpassing expectations of 3,850 million and up from 1,111 million previously.

• The US Dollar faces challenges despite the stronger US economic data released on Wednesday.

Australian Dollar (AUD) moves little against the US Dollar (USD) on Thursday, after registering more than 0.25% gains in the previous session. The AUD/USD pair remains steady following the release of Australia’s Trade Balance data.

Australia’s Trade Surplus widened to 3,938 million month-over-month (MoM) in September, exceeding the 3,850 million expected and 1,111 million (revised from 1,825 million) in the previous reading. Exports rose by 7.9% MoM in September, swinging from a previous decline of 8.7% (revised from -7.8%). Meanwhile, Imports rose by 1.1% MoM, compared to a previous rise of 3.3% (revised from 3.2%).

The AUD received support against the US Dollar (USD) after China’s Finance Ministry announced on Wednesday that it will lift some tariffs on US agricultural products starting November 10. The ministry also said that the 24% tariffs on certain US goods will be suspended for one year, while the 10% tariffs will remain in place.

However, the Chinese government has also ordered state-funded data centres to cancel plans to purchase foreign chips as tensions seem to continue on this front between the US and China. Any change in the Chinese economy could impact the AUD as China is a major trading partner for Australia.

US Dollar declines despite stronger economic data

The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is extending its losses and trading around 100.00 at the time of writing. The Greenback declines despite a stronger-than-expected US economic data released on Wednesday.

ADP Employment Change in the US climbed by 42,000 in October, compared to the 29,000 decrease (revised from -32,000) seen in September. This figure came in better than the estimations of 25,000.

US ISM Services PMI climbed to 52.4 in October, from 50.0 prior and exceeding analysts’ forecasts of 50.8.

The US government impasse has now entered its sixth week and is poised to become the longest federal funding lapse in US history after the Senate once again failed to pass a short-term funding bill. The most recent attempt to resolve the standoff, Republican-backed temporary legislation, was rejected by the Senate for the 14th time on Tuesday.

The US Dollar may receive support from the cautious sentiment surrounding the US Federal Reserve (Fed) policy stance for December. Fed funds futures traders are now pricing in a 69% chance of a cut in December, down from 90% a week ago, according to the CME FedWatch Tool.

Fed Chair Jerome Powell said last week during the post-meeting press conference that another rate cut in December is far from certain. Powell also cautioned that policymakers may need to take a wait-and-see approach until official data reporting resumes.

The White House announced on Tuesday that China will suspend extra export controls on rare earths and end probes into US semiconductor firms, in exchange for the US pausing some tariffs and canceling a planned 100% levy on Chinese exports.

US President Donald Trump announced a cut to fentanyl-related tariffs on imports from China, lowering the rate from 20% to 10%, and the continued freeze of some of his reciprocal levies on Chinese goods. The moves will go into effect on November 10, per Bloomberg.

China's RatingDog Services Purchasing Managers' Index (PMI) fell to 52.6 in October from 52.9 in September. The data matched the market forecast of 52.6 in the reported period. Manufacturing PMI declined to 50.6 in October from 51.2 in September. The market forecast was for a 50.9 print. It is important to note that any shift in China’s economic conditions could also affect the Australian dollar (AUD), given the close trade ties between China and Australia.

The S&P Global Australia Services PMI climbed to 52.5 in October from 52.4 in September, signaling continued growth in services activity and extending the expansion streak to 21 months. Meanwhile, Composite PMI came in at 52.1, down from 52.4 prior.

The Reserve Bank of Australia (RBA) decided to maintain the Official Cash Rate (OCR) at 3.6% in the November policy meeting on Tuesday. RBA Governor Michele Bullock said in her post-meeting press conference that policymakers had not discussed rate cuts and emphasized that annual core inflation remaining above 3% is undesirable. Bullock noted that the effects of previous rate cuts are still filtering through the economy. She added that policymakers discussed maintaining a cautious approach regarding the policy outlook.

Melbourne Institute reported on Monday that the TD-MI Inflation Gauge rose 0.3% month-on-month (MoM) in October, easing slightly from a 0.4% gain in September but marking the second consecutive monthly increase. Meanwhile, the annual Inflation Gauge rose 3.1%, edging higher from the previous 3.0%.

Australian Dollar hovers around 0.6500 amid a consolidation phase

The AUD/USD pair is trading around 0.6500 on Thursday. Technical analysis of the daily chart shows the pair consolidating within a rectangle pattern, trading sideways. It remains below the nine-day Exponential Moving Average (EMA), indicating a weaker short-term momentum.

A successful break below the psychological level of 0.6500 would prompt the AUD/USD pair to test the lower boundary of the rectangle around 0.6460, followed by the five-month low of 0.6414, which was recorded on August 21. Further support lies at the six-month low at 0.6372.

On the upside, the initial barrier lies at the nine-day Exponential Moving Average (EMA) of 0.6520, followed by the 50-day EMA at 0.6539. A break above these levels would improve the short- and medium-term price momentum and support the AUD/USD pair to explore the region around the rectangle’s upper boundary around 0.6630. Further advances would signal a bullish bias and support the pair to approach the 13-month high of 0.6707, recorded on September 17.