Australian Dollar steadies above 0.7000 on strong trade surplus, subdued USD

• The Australian Dollar consolidates above 0.7000, supported by a weaker US Dollar and stronger Australian trade data.
• Australia's trade surplus widened in September as exports increased and imports declined.
• The Reserve Bank of Australia's cautious monetary policy outlook limits gains ahead of key US employment data.

AUD/USD continues to consolidate above the 0.7000 level on Thursday, trading around 0.7010 at the time of writing, up a modest 0.04% on the day. The Australian Dollar (AUD) benefits from persistent weakness in the US Dollar (USD) and encouraging Australian trade data, despite the cautious monetary policy outlook of the Reserve Bank of Australia (RBA).

The latest figures released by the Australian Bureau of Statistics (ABS) on Thursday show that Australia's trade surplus widened to A$2.826M in September from A$184M in the previous month. The August figure was initially reported at A$495 million. Australian exports rose 2.3% in September, following a revised 3.1% increase in August. Meanwhile, imports declined 3.3%, reversing a revised 6.2% increase in the previous month. These figures highlight a significant improvement in Australia's trade balance, providing additional support for the Aussie.

However, AUD/USD gains remain limited by the dovish tone adopted by the RBA on Tuesday. The Australian central bank raised interest rates but signaled a more cautious approach to future monetary policy decisions. The RBA highlighted growing risks to employment and removed explicit references to further interest rate hikes from its policy statement for the first time since June. This shift in communication has reduced expectations of another rate increase in December, limiting the Australian Dollar's upside potential.

On the US side, AUD/USD also benefits from broad-based Greenback weakness following the United States (US) midterm elections. The Democrats' victory in both chambers of Congress has raised concerns about potential political gridlock in Washington, which could complicate budget negotiations and the administration's economic agenda.

Nevertheless, recent US economic data could limit further losses in the US Dollar. The ADP Employment Change report released on Wednesday showed that the private sector added 86K jobs in October, exceeding expectations of 69K. Meanwhile, the Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI) edged down to 54.5 from 54.9, but remained above the 50 threshold that signals an expansion in economic activity.

These figures highlight the resilience of the US economy and reinforce expectations of further monetary tightening by the Federal Reserve (Fed). According to the CME FedWatch tool, markets currently price in around an 81% chance of an interest rate hike in December.

Investors now turn their attention to Thursday's US Initial Jobless Claims and, more importantly, Friday's Nonfarm Payrolls (NFP) report. These releases could provide further insight into the strength of the US labor market and shape expectations for the Fed's next monetary policy decision, potentially influencing the direction of AUD/USD.

AUD/USD technical analysis

In the one-hour chart, AUD/USD trades at 0.7012. The pair holds a mildly constructive stance as it trades above the 100-period simple moving average (SMA) near 0.7004 and the rising trend-line support coming in around 0.7008, while remaining capped by the 200-period SMA at 0.7018. The Relative Strength Index (RSI) hovers just above the 50 line near 54, hinting at modest bullish momentum but not yet strong enough to force a clear break of the immediate overhead barrier.

On the topside, initial resistance is defined by the 200-period SMA at 0.7018, with further hurdles at the horizontal levels of 0.7040 and 0.7068. On the downside, immediate support is seen at the uptrend line near 0.7008, followed by the 100-period SMA at 0.7004; a deeper pullback would expose the psychological 0.7000 handle and then the more distant horizontal floor at 0.6954.

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