- Australian Dollar moves higher after recovering daily losses amid a stronger ASX 200 Index.
- Australia’s equity market strengthens following Friday’s gains on Wall Street.
- US Dollar gained ground on the reduced likelihood of a Fed rate cut in June.
- US Nonfarm Payrolls added 303,000 new jobs in March, surpassing the anticipated 200,000 jobs.
The Australian Dollar (AUD) recovers intraday losses and moves into positive territory on Monday, likely influenced by gains in the domestic equity market. The ASX 200 Index sees upward movement during the week’s opening session, particularly driven by a surge in tech stocks. However, the steady US Dollar (USD) may attempt to constrain the advancement of the AUD/USD pair.
Australian Dollar (AUD) faced challenges following the release of unchanged Final Retail Sales and downbeat Trade Balance data from Australia during the previous week. Notably, Australia reported its smallest Trade Surplus in five months for February, attributed partly to a decline in iron ore exports.
The US Dollar Index (DXY) gained ground on higher US Treasury yields following the release of robust Nonfarm Payrolls data from the United States (US) on Friday. The improved labor market performance has reduced the likelihood of a rate cut in June from the Federal Reserve (Fed). According to the CME FedWatch Tool, the probability of a rate cut has decreased to 46.1%.
- Australia’s Trade Surplus (MoM) narrowed to 7,280 million in March, falling short of the expected 10,400 million and February’s reading of 10,058 million.
- Australia’s Exports decreased by 2.2% month-over-month, contrasting with the previous increase of 1.6%. The nation’s Imports grew by 4.8%, compared to 1.3% prior.
- Australia’s Final Retail Sales were unchanged at 0.3% in February, which is in line with expectations.
- The US Treasury stated Secretary Janet Yellen’s meeting with China’s Finance Minister Lan Foan, where they discussed the macroeconomic outlook and financial developments in both the United States and China. They also discussed the significant role that the Treasury and the Ministry of Finance can play in maintaining a durable communication channel between the two countries.
- Federal Reserve Bank of Dallas President Lorie K. Logan emphasized on Friday that, in light of the upward risks to inflation, she deems it premature to contemplate cutting interest rates. She stressed the necessity of resolving more uncertainty regarding the economic trajectory before making such decisions.
- US Nonfarm Payrolls (NFP) reported a significant increase of 303,000 jobs in March, surpassing expectations of 200,000 and the previous reading of 270,000.
- US Average Hourly Earnings rose by 0.3% month-over-month in March, meeting expectations. The previous reading was 0.2%. There was an increase of 4.1% on an annual basis, aligning with the market consensus but slightly lower than 4.3% prior.
- US Initial Jobless Claims for the week ended March 29 rose by 9,000 to 221,000 from the previous week’s reading of 212,000, below the market consensus of 214,000.
- US Challenger Job Cuts posted 90.309K for March against the previous reading of 84.638K.
- US ADP Employment Change rose by 184K in March, compared to the 155K increase in February, above the market consensus of 148K.
The Australian Dollar trades around 0.6580 on Monday. The immediate resistance region is observed around the 61.8% Fibonacci retracement level of 0.6596, coinciding with the psychological level of 0.6600. A breakthrough above this level could potentially propel the AUD/USD pair to explore the area around the major level of 0.6650, followed by March’s high of 0.6667. On the downside, key support is identified around the nine-day Exponential Moving Average (EMA) of 0.6557 and the major support level of 0.6550. A breach below the latter could exert downward pressure on the AUD/USD pair, potentially leading it toward the psychological level of 0.6500.
AUD/USD: Daily Chart
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.10% | -0.12% | -0.12% | -0.23% | 0.04% | -0.19% | -0.04% | |
| EUR | 0.10% | 0.00% | -0.01% | -0.11% | 0.15% | -0.07% | 0.06% | |
| GBP | 0.11% | 0.01% | -0.01% | -0.12% | 0.15% | -0.08% | 0.07% | |
| CAD | 0.11% | 0.00% | 0.00% | -0.11% | 0.16% | -0.07% | 0.07% | |
| AUD | 0.23% | 0.11% | 0.11% | 0.10% | 0.26% | 0.04% | 0.17% | |
| JPY | -0.04% | -0.15% | -0.13% | -0.15% | -0.27% | -0.21% | -0.08% | |
| NZD | 0.19% | 0.07% | 0.07% | 0.07% | -0.05% | 0.22% | 0.13% | |
| CHF | 0.04% | -0.07% | -0.07% | -0.08% | -0.19% | 0.08% | -0.15% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast 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, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if 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 of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
