AUD/USD gains as market reacts to weak US data, global uncertainty
- The AUD/USD pair trades higher around 0.6400, up 0.26% on the day.
- US GDP data misses expectations, showing a contraction of 0.3% in Q1 2025.
- Market expectations for a Fed rate cut in June rise as weak data weighs on the USD.
- Investors remain cautious ahead of key US data releases, including NFPs and GDP for Q1 2025.
The AUD/USD pair saw a slight uptick as investors weighed weak United States (US) economic data, including a contraction in Q1 GDP. The market now expects potential Federal Reserve (Fed) rate cuts, which have pressured the US Dollar (USD). Despite ongoing trade tensions and uncertainty, the Australian Dollar (AUD) performed well, with the pair trading near the 0.6400 level. The next key focus will be the release of US Nonfarm Payrolls and GDP data later this week.
Daily digest market movers: Weak US GDP, tariff concerns persist
- The AUD/USD pair rises after testing resistance near 0.6417, buoyed by weaker-than-expected US GDP.
- President Donald Trump hints at trade talks with Canada, but uncertainty remains over US-China negotiations.
- China’s weak manufacturing PMI adds to the risk-off sentiment, impacting commodity prices like copper.
- The US Dollar Index (DXY) hovers flat at 99.30, as traders await key economic data releases.
- Personal consumption data shows modest growth, but the overall economic outlook remains uncertain.
- The US labor market shows signs of slowdown, with ADP Employment data missing expectations.
- Traders are closely watching the PCE inflation data, with markets pricing in potential rate cuts.
- President Trump’s comments on tariffs and trade policy keep investors on edge, impacting the USD.
- The DJIA drops 0.51% as the Q1 GDP contraction weighs on market sentiment.
- The Reserve Bank of Australia (RBA) remains cautious on inflation, with softer CPI data increasing rate cut expectations.
- Global uncertainty surrounding trade policies keeps market volatility elevated, particularly in the FX market.
Technical Analysis: AUD/USD maintains bullish outlook despite US Dollar weakness
The AUD/USD pair is showing a bullish signal, trading around 0.6400, up 0.26% on the day. The pair is currently positioned mid-range between 0.6356 and 0.6417. The Relative Strength Index (RSI) is neutral at 56.96, while the Moving Average Convergence Divergence (MACD) indicates a buy signal. The Awesome Oscillator is neutral at 0.0096. Short-term moving averages, including the 10-day SMA at 0.6391 and the 100-day SMA at 0.6281, support the bullish outlook. However, the 200-day SMA at 0.6463 suggests a longer-term sell signal. Support levels are at 0.6391, 0.6377, and 0.6342, while resistance levels sit at 0.6409, 0.6411, and 0.6463.
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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