Australian Dollar as stronger US Dollar offsets cautious Aussie outlook

• AUD/USD dropped as investors reacted to the US ISM Manufacturing PMI staying in expansion but easing from May’s level.
• US labor market signals softened after ADP private payrolls rose by 98,000 in June, below expectations.
• Australia’s Trade Balance is the next key catalyst with markets watching whether exports, especially iron ore and coal, can continue to support the Aussie.

AUD/USD fell to 0.6900 on Wednesday and is now trading cautiously as investors digest mixed United States (US) economic data. The latest ISM Manufacturing Purchasing Managers Index (PMI) showing factory activity remained in expansion, while ADP private payrolls pointed to a softer pace of hiring.

The US ISM Manufacturing PMI eased to 53.3 in June from 54.0 in May, missing expectations for an unchanged reading. Despite the pullback, the index remained above the 50.0 threshold, showing that the manufacturing sector expanded for the sixth consecutive month. New Orders slipped to 56.0 from 56.8, while the Prices Paid Index fell to 73.0 from 82.1, suggesting that input prices cooled but remained elevated.

The US Dollar (USD) initially found some support as manufacturing activity remained in expansion territory. However, the upside was limited after the ADP National Employment Report showed that private payrolls rose by 98,000 in June, below the 118,000 expected and down from May’s 122,000 increase.

The softer ADP reading added caution ahead of the official US Nonfarm Payrolls (NFP) report as investors continue to assess whether the labor market is cooling enough to affect the Federal Reserve’s (Fed) policy outlook. For AUD/USD, the data mix keeps the pair caught between a resilient US economy and signs of slower job creation.

On the Australian side, attention now turns to the upcoming Trade Balance data on Thursday. Australia’s previous April report showed a goods trade surplus of A$1.8 billion, returning to surplus after March’s unexpected deficit. The improvement was driven by a rebound in resource exports, especially iron ore and coal, while imports rose only 0.8% MoM.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.6903, holding just above the 20-period Simple Moving Average (SMA) at 0.6895, while remaining well below the 100-period SMA at 0.6980, keeping the broader tone neutral and capped. The pair is pivoting around a horizontal level at 0.6903, with the Relative Strength Index (RSI) near 49 hinting at balanced momentum after the recent recovery from oversold territory.

On the topside, initial resistance is aligned at 0.6916, ahead of a more significant cap near 0.6930, while the 100-period SMA at 0.6980 forms a higher barrier that would need to give way to revive a sustained bullish phase. On the downside, immediate support is seen at the 20-period SMA around 0.6895, followed by the horizontal floor at 0.6882, where a break lower would expose deeper weakness in the near term.

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