Over recent days, the Australian Dollar has been on the back foot compared to the US Dollar, showing weakness as traders keep a watchful eye on the anticipated Nonfarm Payrolls report set for Friday. The pairing of AUD/USD has faced some pressure as the American currency maintains its firmness in the lead-up to this significant data release, which might cause ripples across financial markets.
In contrast, the Reserve Bank of Australia has held its views stable, expecting the country’s economic growth to dial down to about 2% by the close of 2025. Previously, these projections provided some strength to the Aussie Dollar. However, markets remain vigilant over possible policy adjustments that could arise from fluctuating inflation and labor market conditions.
A potential boost for the AUD could come from the latest developments in trade tariffs: President Donald Trump has revised his stance by excluding goods from Mexico and Canada, protected under the USMCA, from his proposed hefty 25% tariffs. This easing might inject some relief into international trade relations.
Despite some promising Australian GDP data surpassing expectations, Australia’s currency has been grappling due to uncertainties in global trade policies. The economy saw a 0.6% quarter-over-quarter growth in the final quarter of 2024, marked as an improvement over the previous quarter’s 0.3% and outperforming predictions of a 0.5% rise. Annually, the growth climbed to 1.3% from 0.8% in the earlier quarter.
Geopolitical tensions continue to loom over the market, potentially posing a threat. Reports have surfaced of a Chinese foreign ministry official threatening retaliation against Trump’s escalating trade tariffs, which could potentially involve military maneuvers. Given that China is Australia’s largest trade ally, any further escalation in this arena could heavily impact the Australian Dollar’s valuation.
Meanwhile, the US Dollar has been on steady ground as traders prepare for the insights from the Nonfarm Payrolls release. Expectations are for an uptick in jobs, projecting an increment from January’s 143,000 to about 160,000 for February. Weekly jobless claims for early March showcased a drop, according to the US Department of Labor, which may paint a slightly brighter picture of the labor market.
Federal Reserve dynamics are also in the spotlight, with Atlanta Fed President Raphael Bostic outlining the economic uncertainty facing the US, emphasizing the Fed’s commitment to keeping inflation in check without risking job market sustainability.
Australia posted a healthy trade surplus in January, reaching 5,620 million AUD, which exceeded forecasts and was an improvement over the previous month’s revised figures. This surplus was buoyed by an uptick in exports, driven notably by increased demand for non-monetary gold, while imports saw a slight decline.
On the technical analysis front, the AUD/USD is flirting with a potential bounce-back. The pair, trading around 0.6320, is showing signs of a bullish pattern within an ascending channel on the daily chart. Traders are eyeing resistance levels near the February high of 0.6408, while keeping an eye on critical support levels around the 50-day EMA at 0.6309.
In summary, the Australian Dollar continues to navigate a challenging course marked by global economic currents and domestic data. All eyes remain on trade discussions and upcoming US labor statistics, which will likely set the tone for further market movements.
