- AUD/USD makes a strong move upward to the upper-0.6400s following July’s US NFP data.
- The US dollar might lose its appeal as traders anticipate possible Fed rate cuts in September.
- Australia’s final S&P Global Manufacturing PMI held steady in July.
The widespread recovery linked to risk appetite is likely to bolster the Australian Dollar (AUD), pushing AUD/USD back towards the critical resistance level around 0.6500 by Friday.
AUD/USD approaches 0.6400 support
The currency pair rose to two-day highs in the 0.6480-0.6490 range, closing the week positively after the disappointing US non-farm payroll report, which added only 73K jobs in July.
Meanwhile, the US dollar (USD) continues to lose steam as market players assess a potential cooling in the US labor market, suggesting possible interest rate cuts by the Fed after the summer break.
On the domestic front, Australia’s final S&P Global Manufacturing PMI for July was recorded at 51.3, whereas producer prices climbed by 0.7% in the second quarter and 3.4% year-on-year.
What about technology?
A temporary resistance seems to be forming at the 55-day SMA of 0.6504, just before reaching the peak set on July 24, 2025, and the high observed in November 2024.
On the downside, initial support can be found at the weekly low of 0.6418 (August 1).
Australian Dollar FAQ
One major factor influencing the Australian Dollar (AUD) is the interest rate established by the Reserve Bank of Australia (RBA). Given that Australia is rich in resources, the price of iron ore—its biggest export—is also crucial. Additionally, the economic health of China, Australia’s largest trading partner, plays a significant role, along with overall market sentiment regarding risk-taking.
The RBA influences the AUD by setting interest rates that affect lending across Australian banks, which in turn impacts the broader economy. The RBA aims to maintain a stable inflation rate of 2-3% through interest rate adjustments. Relatively higher interest rates compared to other major central banks tend to support the AUD, while lower rates do the opposite. They can also employ quantitative easing or tightening to affect credit conditions.
Given that China is Australia’s largest trading partner, its economic performance greatly affects the value of the AUD. If the Chinese economy is strong, it buys more raw materials and goods from Australia, boosting demand for the AUD. Conversely, slower growth in China can have negative repercussions for the Australian dollar.
Iron ore, being Australia’s largest export with China as a key buyer, significantly impacts the AUD. In 2021, iron ore exports to China were valued at $118 billion. Generally, rising iron ore prices lead to an increase in the AUD due to higher demand, while falling prices have the opposite effect. Higher iron ore prices often positively influence Australia’s trade balance, further benefiting the AUD.
Trade balances, or the difference between export revenue and import expenses, are another factor that can influence the AUD. A strong demand for a popular export can enhance the value of the currency, while a negative trade balance diminishes it. A positive net trade balance tends to strengthen the AUD, while a negative one has the reverse effect.
