Australian Dollar climbs as the Greenback falls on soft US data
- Soft Retail Sales keep Fed hike speculation under pressure.
- Trump’s war stance lifts Oil and long-end yields.
- Fed minutes, PMIs and Australian wages drive next move.
The Aussie Dollar trades near two-month highs of 0.7129, supported by a weaker US Dollar, amid a scarce economic docket in the US, following last week’s softer Retail Sales data. The AUD/USD trades at 0.7106, up 0.32%.
AUD/USD gains as weaker Dollar offsets renewed Oil risks
Sentiment remains mixed while crude Oil prices edged higher on news that US President Donald Trump said that he is in no rush to end the US-Iran war. This reignited inflationary fears in the US, as Treasury yields – particularly the 30-year bond yield - reached levels last seen in 2007 during the Great Financial Crisis (GFC).
The US economic docket featured the NY Fed Empire State Manufacturing Index, which rose to its highest level in four years, though the sub-components provided a mixed reading. Ahead, the US economic docket will feature the Federal Reserve’s last meeting minutes on August 19, followed by jobless claims data and Flash PMIs, each on August 20 and 21, respectively.
US lower-tier data is expected on Tuesday, August 18, with traders eyeing housing data and the Federal Reserve's Industrial Production report. In Australia, the docket will feature the Westpac Consumer Confidence for August, followed by the Wage Price Index for the second quarter, which is expected to rise 0.8% QoQ, as seen in the previous quarter.
AUD/USD Price Forecast: Technical outlook
In the daily chart, AUD/USD trades at 0.7105. The pair retains a bullish near-term bias as it holds above a dense floor of rising trend-line supports clustered between roughly 0.7058 and 0.7087, while also trading over the tightly grouped 50-, 100- and 200-day simple moving averages around 0.6992. Price is effectively testing a longer-term ascending trend line that now aligns near the market, and the Relative Strength Index at 65 suggests firm but not yet extreme bullish momentum as buyers press the advance.
On the topside, initial resistance is defined by the longer-term rising trend line coming in just above spot near 0.7111; a sustained break higher would open the way for a continuation of the uptrend. On the downside, immediate support is seen at the current trend-line pivot zone around 0.7105, followed by a layered band of ascending supports at 0.7087 and 0.7086, with further protection at 0.7058; the cluster of major simple moving averages around 0.6992 represents a deeper, more strategic support area that would need to give way to undermine the broader constructive tone.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
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