So far this week the Australian Dollar (AUD) has felt the effects, falling sharply from its recently established multi-month peaks. It trades up against USD now hovering around 0.6660. After recently topping and hitting a nine-month high at around 0.6680, the currency has started to roll over and fade from its recent bullish progress. Market analysts are closely monitoring upcoming economic indicators, particularly Thursday’s labour market report for August, which could significantly impact the AUD/USD exchange rate.
With respect to that, the currency is moving in a known range. The next short-term resistance is now 0.6679, the 2025 high reached on September 16. On the other hand, solid support kicks in at the August bottom of 0.6414, set on August 21. How these three levels interact with one another will be key to setting the AUD’s course in the short term.
Recent Trends in AUD/USD
The Australian Dollar was at the top of a volatile range recently, breaking down from multi-month highs. On Wednesday it came under renewed downside pressure, causing market participants to recalibrate their outlook. The AUD/USD pair lost some of the aforementioned strength during the Asia-Pacific session, pulling back to around the 0.6700 resistance level.
The daily AUD/USD chart shows that the Australian Dollar is stuck in a clear well-established daily range. Traders will want to keep a close eye on the 200-day Simple Moving Average (SMA) at 0.6393. This level would be an important leap point or breakout area for future price direction. The June trough level reached a low of 0.6372 on June 23. This increase further muddles the picture, adding a new possible floor on support.
Against this backdrop of volatility, we sense hesitance around re-entry among our constituents. Analysts argue that after the buyers convincingly surpass the dealer resistance level at 0.6679, they would then set their sights on the November 2024 high. That previous peak wasn’t very high at all, reaching just 0.6687 on November 7. The psychological barrier of 0.7000 looms larger on the horizon as a more crucial target for the AUD.
Economic Indicators and Market Expectations
Global risk sentiment along with recent economic data from Australia has provided a mixed backdrop for the Australian Dollar. Analysts were surprised on the upside by the Q2 GDP growth ceiling, which grew at 5.2% y/o/y. In an extraordinary one, industrial production jumped by this much. Additionally, GDP rose by 0.6% in the April-June quarter and posted a year-on-year increase of 1.8%.
Next door, Australia’s August Manufacturing PMI was 53.0, indicating an expanding manufacturing base down under. At the same time, the Services PMI jumped up to a surprisingly strong 55.8, strongly expansionary territory in services. These numbers reflect a deeply positive and optimistic economy. They have not been sufficient to push the otherwise-flailing Australian Dollar upward against the US Dollar on a sustained basis.
Market expectations for the OCR are quiet presently. Projections indicate it will remain the same at its next meeting on September 30. Pricing at this point implies roughly 30bp of Fed easing by year-end. This suggests that market participants are anticipating changes to monetary policy which would have downstream effects on the expected performance of the AUD.
Looking Ahead
Traders are preparing for Thursday’s labour market report for August. They’re especially looking forward to how it can affect the AUD/USD exchange rate. A spectacular jobs report would go a long way to bolstering the Australian Dollar. Weak numbers could add to existing negative forces on the currency.
Given the existing resistance at 0.6679 and support at 0.6414, market observers will be keenly analyzing how these levels hold up amid forthcoming economic news. Any outsized positive employment growth in Thursday’s labour report would likely get the buyers’ attention. This could push the AUD in the direction of its next resistance level. On the other hand, a disappointing data run might do enough to stiffen bearish conviction and pressure the lows of support again.