Australian Dollar rises slightly following improved Trade Balance figures

• The Australian dollar rises following the release of domestic trade balance data on Thursday.
• Australia’s trade surplus for June increased to 5,365 million, surpassing the forecast of 3,250 million.
• Trump hinted that he might apply more tariffs on China similar to those on Russian oil purchases.

On Thursday, the Australian Dollar (AUD) strengthened against the US Dollar (USD), building on a 0.5% gain from the previous session. This boost is attributed to positive trade balance reports.

The Australian Bureau of Statistics (ABS) revealed that the trade surplus in June soared to 5,365 million, a significant jump from the previous 1,604 million (revised from 2,238 million), exceeding the anticipated 3,250 million. Monthly exports rose by 6.0%, while imports declined by 3.1%.

In China, the trade balance was reported at CNY 70.51 billion for July, an increase from the earlier figure of CNY 58.596 billion. Exports grew by 8.0% in July compared to 7.2% in June; imports also rose by 4.8% year-on-year from a 2.3% increase recorded previously. When converted to US dollars, China’s trade balance reported +9.824 billion, marking an impressive leap.

US President Donald Trump cautioned that China’s potential response might mirror the tariffs previously levied on Russian oil, depending on future developments.

The Reserve Bank of Australia (RBA) is widely anticipated to implement a 25 basis point rate cut next week, reducing cash rates to 3.60%. As of June, cases for easing have heightened due to core inflation leveling off at 2.7%, remaining within the RBA’s target of 2-3%, alongside a slowing unemployment rate and wage growth.

The Australian Dollar likely to rise as the US Dollar fluctuates

• The US Dollar Index (DXY), measuring the dollar against six major currencies, was around 98.30 as of this report. Upcoming US weekly unemployment claims will be released later on Thursday.
• Trump announced on Tuesday his intention to appoint a new Federal Reserve Chairman by the end of the week, affirming his choice among several contenders, including economic advisor Kevin Hassett.
• The Institute for Supply Management (ISM) Services PMI dipped to 50.1 in July from 50.8 the month prior, falling short of expectations at 51.5. Meanwhile, ISM services prices surged from 67.5 to 69.9; however, the employment index fell from 47.2 to 46.4, with the new order index sliding from 51.3 to 50.3.
• The Federal Reserve is expected to announce a 25 basis point rate cut in September due to disappointing labor market data, which has raised concerns about the US economic outlook.
• US and China did not reach an agreement to extend the current 90-day tariff suspension during recent discussions in Stockholm, with the existing suspension due to end on August 12. Ultimately, decision-making rests with Trump.
• The CAIXIN Services PMI in China unexpectedly jumped from 50.6 in June to 52.6 in July, outpacing market forecasts of 50.2.
• Australia’s AI Group Manufacturing PMI saw a slight uptick, gaining 4.9 points to -23.9 in July, while still indicating a contraction in the sector. The AI Group Australian Industry Index, however, bounced back, increasing 5.8 points to -3.2 and signaling gradual recovery, the best reading in three years.
• Interestingly, Australia has avoided the latest tariff increases imposed by the US, with the baseline tariff on Australian goods remaining at 10%.

The Australian Dollar sits close to 0.6500 after maintaining a position beyond EMA for over nine days

The AUD/USD pair trades near 0.6500 this Thursday. A daily chart analysis suggests a bearish trend, keeping the 14-day relative strength index (RSI) below the 50 threshold. However, the pair has surpassed the nine-day exponential moving average (EMA), indicating stronger short-term momentum.

If the AUD/USD pair faces downward pressure, it may test the 50-day EMA at 0.6495 and the nine-day EMA at 0.6494. A dip below these levels could negatively affect both short- and medium-term price momentum, pushing towards the two-month low of 0.6419 reached on August 1.

The pair has neared a psychological mark of 0.6600 and approached a nine-month high of 0.6625 recorded on July 24.

AUD/USD: Daily Charts