Australian Dollar steadies near 0.6400 as US Dollar weakens post-PMI
- The AUD/USD trades flat around the 0.6400 zone as the US Dollar struggles to hold gains after weak business activity data.
- The US Composite PMI fell to 51.2, services lost steam, and Bessent said US tariffs may drop “mutually,” driving risk appetite.
- Technicals show bullish bias; support lies around 0.6347 while resistance emerges at 0.6395 and above.
The Australian Dollar (AUD) trades flat against the US Dollar (USD) on Wednesday, holding close to the 0.6400 area after a volatile session. The pair consolidated within a tight range of 0.6349 to 0.6436, reflecting a pause in directional conviction. This comes after a turbulent 24 hours for the Greenback, as the US Dollar Index (DXY) erased its early pop toward the 100.00 mark and settled near 99.50. Market sentiment was dented by Treasury Secretary Scott Bessent’s comments suggesting that current tariffs with China are unsustainable and may decline “in a mutual way.” Meanwhile, S&P Global’s preliminary April Composite PMI showed slower business activity growth, with the services sector losing traction.
Daily digest market movers: Markets digest fresh US data
- The DXY failed to sustain gains despite touching the 100.00 level early Wednesday, retreating to the 99.50 region by the end of the session.
- The pullback came after Treasury Secretary Bessent refrained from offering a timeline for new tariff discussions with China and noted that any talks would happen at levels below Trump and Xi. He added that current tariff revenues would fall short of funding TCJA tax cuts, raising fiscal concerns.
- The S&P Global flash PMI for April indicated a broader loss of momentum in US economic activity. The Composite PMI fell to 51.2 from 53.5, driven by a decline in services to 51.4. Manufacturing slightly improved to 50.7, but overall sentiment weakened. Inflation pressures persisted, complicating the Federal Reserve’s ability to ease policy.
- Risk assets showed mixed responses. US equities slid from highs on tariff uncertainty but later recovered some ground. Meanwhile, Gold dipped below $3,300 and the US 10-year yield remained under pressure. Crude oil prices dropped to four-day lows, while Silver rose to multi-week highs.
- In currencies, EUR/USD and GBP/USD both retreated, weighed down by Greenback strength and soft European data. The yen weakened as USD/JPY broke above the 143.00 level, boosted by US rate expectations.
Technical Analysis: AUD/USD holds firm near 0.6400, bulls remain in control
The AUD/USD pair shows a steady performance near the 0.6400 level, with price action hovering around the midpoint of the intraday range (0.6349 to 0.6436). The technical outlook favors further upside.
The Relative Strength Index (RSI) stands at 56.01, suggesting neutral momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) confirms a bullish signal, aligning with broader trend strength. The Stochastic %K at 89.16 and the Commodity Channel Index (CCI) at 80.84 remain neutral.
Short-term trend indicators reinforce the bullish case. The 10-day EMA (0.6337), 10-day SMA (0.6347), 20-day SMA (0.6267), and 100-day SMA (0.6285) are all aligned to the upside. The 200-day SMA at 0.6472, however, continues to act as longer-term resistance.
Australian Dollar FAQs
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.
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