AUD/USD failed to build on its rebound from the 0.7120 area, a near two-week low, and traded sideways in Thursday’s Asian session, holding above the mid-0.7100s after Australian trade figures and China’s RatingDog Services PMI. Australia posted a July trade surplus of A$1,923M, down from a revised A$2,341M in the prior month though above the A$1,390M consensus, while China’s Services PMI rose to 51.4 in August from 50.4 and exceeded the 50.6 forecast. Even so, the releases did not translate into fresh momentum for the pair.
Policy expectations remain in focus: markets increasingly price the RBA considering tightening after stronger July inflation data and firmer Q2 GDP, lending support to the AUD. On the other side, a firmer USD is underpinned by higher perceived odds of a Fed rate rise later this month as well as escalating US-Iran tensions, helping the dollar stabilise after a US ADP-driven drop, with attention turning to US ISM Services PMI before Friday’s NFP. Technically, AUD/USD is holding above the 100-period SMA on the 4-hour chart, with 0.7130 acting as key support; a break lower could accelerate selling, while a sustained move above 0.7200 would improve the upside case.
Key Technical Levels and Bullish Case for AUD/USD
We suggest that derivative traders focus closely on the 0.7130 support level for the AUD/USD pair in the coming weeks. This level aligns with the 100-period Simple Moving Average on the 4-hour chart, which has historically acted as a crucial pivot for near-term momentum. If the pair holds above this mark, we recommend looking for opportunities to build long positions targeting a move back toward 0.7200.
To support this bullish bias, we can look at Australia’s resilient economic foundation, highlighted by the recently released July trade surplus of A$1,923 million. This figure comfortably beat market expectations of A$1,390 million, proving that export demand remains robust despite global headwinds. Coupled with China’s services sector expanding to 51.4 in August, the macroeconomic backdrop for the trade-sensitive Australian Dollar remains fundamentally supported.
Furthermore, we are closely watching the shifting interest rate expectations between the Reserve Bank of Australia and the Federal Reserve. Recent hotter-than-expected domestic inflation and strong second-quarter GDP growth have significantly raised the odds of an RBA rate hike. Historically, a widening yield spread in favor of the Aussie dollar has sparked sustained rallies, suggesting that pullbacks toward 0.7130 could be prime buying opportunities for option and futures traders.
Risks From US Data and Volatility Triggers
However, we must also prepare for volatility stemming from the US side, especially with the upcoming US nonfarm payrolls report and rising geopolitical tensions. A surprise hawkish shift from the Federal Reserve or a breakdown below the 0.7130 support zone would invalidate our short-term bullish outlook. In that scenario, we advise traders to quickly pivot and hedge portfolios against a deeper corrective decline toward the 0.7050 range.
