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- Australian Dollar moves sideways ahead of US Nonfarm Payrolls data
Australian Dollar moves sideways ahead of US Nonfarm Payrolls data
- Australian Dollar experienced positive momentum due to the correction in the US Dollar.
- Australia's FSR report stated that Australian banks remain well-positioned despite elevated global and domestic risks.
- Investors await the US NFP report, seeking confirmation of a tight labor market.
The Australian Dollar (AUD) consolidates after recent gains in the last two sessions. The Aussie pair gained support from the correction in the US Dollar (USD) following a decline in US Treasury yields.
Australia’s report for October 2023, Financial Stability Review (FSR) from the Reserve Bank of Australia (RBA) indicates elevated global financial stability risks due to challenging macroeconomic conditions.
The rise in inflation and interest rates since 2021 has strained household and business finances not only in Australia but also globally. Prolonged high levels of inflation and interest rates pose a risk of significant credit quality deterioration, potentially leading lenders to reduce credit provision.
However, the report mentioned that Australian banks remain well-positioned to continue supplying credit to the economy despite elevated global and domestic risks.
Moreover, a November meeting between President Biden and Chinese leader Xi Jinping in San Francisco is in the works, signaling an effort to stabilize relations between the world's top two economies.
This potential summit follows their last meeting in Bali, Indonesia, in November last year, where both leaders stressed the importance of face-to-face diplomacy and expressed hope for the reconstruction of US-China relations.
The US Dollar Index (DXY) attempts to snap the two-day losing streak. The index continued to correct from an 11-month high due to a decline in the US Treasury yields. However, the previous week’s initial claims for unemployment benefits in the United States (US) showed a downtrend, which indicated improvement in the labor market.
Daily Digest Market Movers: Australian Dollar consolidates ahead of US Nonfarm Payrolls
- RBA’s FSR report affirms that Australian banks are in a robust position to maintain credit supply to the economy, even amid heightened global and domestic risks.
- Australia's Trade Balance (MoM) showed improvement in August, reaching 9,640 million, surpassing market expectations of 8,725 million. July's reading stood at 8,039 million.
- Australia’s central bank could go for a rate hike, with expectations pointing toward a peak of 4.35% by the end of the year. This projection aligns with the persistent elevation of inflation above the target.
- Michele Bullock, the newly appointed governor of the RBA, in her inaugural monetary policy statement following the interest rate decision, emphasized the need for additional tightening of monetary policy.
- Bullock noted that recent data align with the return of inflation to the target range. While inflation in Australia has peaked, it remains elevated and is expected to persist for a while.
- US Initial Jobless Claims for the week ending September 29, improved to 207K from the previous reading of 205K, beating the market expectation of 210K. This suggests that labor market conditions continue to be tight.
- The 10-year US Treasury yield stands above 4.70%, close to the highest level since 2007.
- Traders await the upcoming US Nonfarm Payrolls and Average Hourly Earnings on Friday. Upbeat numbers could trigger more USD gains and increase volatility in the bond market.
Technical Analysis: Australian Dollar holds ground above 0.6350, 21-day EMA emerges as the immediate barrier
Australian Dollar trades hovers around 0.6370 against the US Dollar on Friday. The 21-day Exponential Moving Average (EMA) appears to be a key barrier lined up with the 0.6400 psychological level. A firm break above the latter could open the doors for the pair to explore levels around the 23.6% Fibonacci retracement at 0.6429 level. On the downside, the major level at 0.6300 emerges as the immediate support, followed by November's low at 0.6272.
AUD/USD: Daily Chart
Australian Dollar price today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.06% | 0.07% | 0.02% | -0.06% | 0.11% | 0.00% | 0.05% | |
| EUR | -0.07% | 0.00% | -0.04% | -0.14% | 0.04% | -0.07% | -0.01% | |
| GBP | -0.07% | 0.00% | -0.05% | -0.13% | 0.04% | -0.06% | -0.02% | |
| CAD | -0.01% | 0.04% | 0.04% | -0.08% | 0.08% | -0.03% | 0.03% | |
| AUD | 0.05% | 0.10% | 0.11% | 0.07% | 0.14% | 0.06% | 0.09% | |
| JPY | -0.11% | -0.06% | 0.00% | -0.11% | -0.14% | -0.13% | -0.05% | |
| NZD | 0.00% | 0.06% | 0.07% | 0.02% | -0.06% | 0.10% | 0.04% | |
| CHF | -0.05% | 0.02% | 0.01% | -0.03% | -0.12% | 0.05% | -0.06% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Australian Dollar FAQs
What key factors drive the Australian Dollar?
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.
How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?
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.
How does the health of the Chinese Economy impact the Australian Dollar?
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.
How does the price of Iron Ore impact the Australian Dollar?
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.
How does the Trade Balance impact the Australian Dollar?
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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