AUD/USD Holds Ground as Traders Weigh RBA and Fed Policy Divergence

Traders' Opinions

Summary:

AUD/USD holds above 0.7000 as Australia's stronger trade surplus and a weaker US Dollar support the pair. However, cautious RBA guidance and expectations of another Fed rate hike could limit further gains ahead of US employment data.

BUY AUDUSD

EXP

PENDING

0.70150

Entry Price

0.71370

0.69300

0.69965 -0.00083 -0.12%

Pips

PENDING

0.69300

Exit Price

0.70150

Entry Price

0.71370

AUD/USD is maintaining a foothold above the psychological 0.7000 level, trading around 0.7010 on Thursday as Australian economic data and broad US Dollar weakness provide support. The Australian Dollar has found some stability despite a more cautious policy outlook from the Reserve Bank of Australia (RBA), with September's trade figures offering an additional boost to sentiment.

Data from the Australian Bureau of Statistics showed that the country's trade surplus expanded to A$2.826 billion in September, compared with a revised A$184 million in August. Exports increased by 2.3% after rising 3.1% in the previous month, while imports fell 3.3%, reversing August's revised 6.2% increase. The combination of stronger exports and lower imports points to a substantial improvement in Australia's external trade position, helping underpin demand for the local currency.

Nevertheless, the Aussie is struggling to build stronger upward momentum as the RBA's latest communication has tempered expectations of further monetary tightening. Although the central bank raised interest rates on Tuesday, its cautious assessment of the economic outlook and growing concerns about employment risks suggest policymakers may be less inclined to deliver another increase in December. The removal of explicit language pointing toward additional hikes has further encouraged investors to reassess the likely pace of tightening.

The US Dollar's weakness following the midterm elections has provided another source of support for AUD/USD. Democratic control of both chambers of Congress has raised concerns about political gridlock, particularly around budget negotiations and the administration's economic priorities. However, the Greenback may find some support from evidence that the US economy remains relatively resilient. Private-sector employment increased by 86,000 in October, exceeding expectations of 69,000, while the ISM Services PMI eased slightly to 54.5 from 54.9 but remained firmly in expansion territory.

These figures reinforce the contrast between the RBA's increasingly cautious policy signals and market expectations that the Federal Reserve could maintain a restrictive stance. Investors are currently pricing in approximately an 81% probability of a December Fed rate hike, according to CME FedWatch. This divergence could restrict the Australian Dollar's ability to extend its gains, particularly if upcoming US employment figures reinforce expectations of further tightening.

Attention now turns to Initial Jobless Claims on Thursday, followed by Friday's Nonfarm Payrolls report. A weaker employment outcome could place additional pressure on the US Dollar and help AUD/USD extend its recovery above 0.7000. Conversely, stronger-than-expected jobs data could reinforce the case for another Fed rate increase, potentially reviving demand for the Greenback and limiting the pair's upside. For now, the Australian Dollar has supportive domestic trade figures and a softer US Dollar behind it, but the next sustained move may depend on whether US labour-market data changes the interest-rate outlook.

Technical Analysis

AUD/USD is showing signs of a bullish recovery after rebounding from the 0.6950–0.6960 support area. The recent move has brought the pair back above the psychological 0.7000 level, where price is now consolidating around 0.7015. This recovery suggests buyers are gradually regaining control after the earlier decline, although the pair still needs to establish stronger momentum to confirm a sustained upward move.

The immediate focus is on the 0.6995–0.7010 zone, which now acts as an important support area. As long as AUD/USD holds above this region, the short-term bullish structure remains intact. A successful break above the recent local highs around 0.7030–0.7050 would strengthen the upside case and potentially open the way toward 0.7085, where the next significant resistance is located. Beyond that, the 0.7135–0.7140 region represents another major target for buyers.

The projected price structure suggests a potential continuation higher through a sequence of breakouts and pullbacks. However, failure to hold above 0.6995 would weaken the immediate bullish outlook and expose the pair to a deeper retracement toward 0.6960. For now, the technical bias remains bullish, with a sustained move above 0.7030 likely to provide stronger confirmation that buyers are preparing for another leg higher.

TRADE RECOMMENDATION

BUY AUD/USD

ENTRY PRICE: 0.7015

STOP LOSS: 0.6930

TAKE PROFIT: 0.7137

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