The Australian dollar remains in a mighty uptrend on the daily chart, with prices trading well above the 50 exponential moving average (EMA) at 0.6797 and the 200 EMA at 0.6611, confirming a strongly bullish pattern of higher highs and higher lows since behind schedule November, which bottomed out near 0.6421. During Monday’s session, the AUD/USD pair reached up-to-date three-year highs at 0.7099, testing the psychologically vital break to 0.7100, before returning to close around 0.7072. The rally from a December base near the 0.6500 level has been pointed and largely uninterrupted, with the pair breaking above the 0.7000 level for the first time since February 2023. The gap between price and the 50 EMA continues to widen, suggesting the move is becoming overextended, while the Reserve Bank of Australia (RBA)’s recent 25 basis point hike to 3.85% and the Federal Reserve’s (Fed) decision dovish interest rate paths are a key driver of policy divergence.
The Stochastic Oscillator (14, 5, 5) on the daily chart is moving higher and testing overbought territory, signaling the growth momentum is fading and increasing the likelihood of a short-term pullback or consolidation phase. Immediate resistance sits at the session high at 0.7099, with the next upside target sitting at the 2023 high near 0.7157 if buyers manage to force a immaculate break above 0.7100. On the other hand, support is located at the psychological level of 0.7000, followed by a group of recent consolidation lows around 0.6950 and 0.6896. The key event risk for the pair comes on Wednesday with the delayed release of January’s nonfarm payrolls (NFP) data, originally scheduled for February 6 but postponed to February 11 due to the partial government shutdown. The consensus expects an enhance of 70,000. compared to December’s 50,000, taking into account the annual benchmark revision and unemployment rate data. A softer-than-expected NFP result is likely to reinforce US dollar weakness and push another leg higher towards 0.7160, while a mighty report could trigger a sharper corrective pullback given an already stressed position. Multiple Fed speakers (Schmid, Bowman, Hammack) are also scheduled for Wednesday, increasing the potential for volatility around the data release.
AUD/USD chart
Australian Dollar FAQs
One of the most vital factors for the Australian dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). As Australia is a resource-rich country, another key factor influencing price is the price of its largest export, iron ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as Australia’s inflation, its dynamics and its trade balance. Market sentiment – whether investors take on riskier assets (risk-on) or look for unthreatening havens (risk-off) – also matters, with positive risk for the AUD.
The Reserve Bank of Australia (RBA) influences the Australian dollar (AUD) by setting the interest rates that Australian banks can lend to each other. This affects the level of interest rates throughout the economy. The RBA’s main goal is to maintain a stable inflation rate of 2-3% by raising or lowering interest rates. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low ones. The RBA may also operate quantitative easing and tightening to influence lending conditions, the former being AUD negative and the latter AUD positive.
China is Australia’s largest trading partner, so the health of the Chinese economy has a major impact on the value of the Australian dollar (AUD). When the Chinese economy does well, it buys more raw materials, goods and services from Australia, increasing demand for the AUD and increasing its value. The opposite is the case when the Chinese economy is not growing as speedy as expected. Positive or negative surprises in Chinese growth data therefore often have a direct impact on the Australian dollar and its pairs.
Iron ore is Australia’s largest export, worth $118 billion a year in 2021 figures, with China being the main buyer. The price of iron ore can therefore influence the Australian dollar. Generally speaking, if the price of iron ore increases, the AUD also increases, as aggregate demand for the currency increases. The opposite is true when 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 for the AUD.
The trade balance, or the difference between what a country earns from exports and what it pays for imports, is another factor that can affect the value of the Australian dollar. If Australia produces a highly sought after export, then its currency will only appreciate in value as a result of the excess demand created by foreign buyers wanting to buy its exports compared to spending on import purchases. Therefore, a positive net trade balance strengthens the AUD, and the effect is opposite if the trade balance is negative.
