The Australian Dollar (AUD) remained subdued against the US Dollar (USD) on Friday for the second consecutive day. The AUD/USD pair faces modest resistance as the USD steadies ahead of the upcoming Nonfarm Payrolls (NFP) report in the North American session.
The Reserve Bank of Australia (RBA) maintains its forecast for slower economic growth, projecting a 2% rate by 2025. While this outlook has previously supported the AUD, investor caution persists due to potential policy shifts regarding inflation and the labor market.
The AUD could find some relief after US President Donald Trump modified his stance on tariffs, exempting Mexican and Canadian goods under the US-Mexico-Canada Agreement (USMCA) from his proposed 25% tariffs. However, trade policy uncertainties and broader economic concerns weigh on the Aussie Dollar, despite stronger-than-expected Australian GDP data for Q4 2024. Australia’s economy grew 0.6% quarter-over-quarter, surpassing expectations of 0.5%, and 1.3% year-over-year, up from 0.8% in Q3.
Geopolitical risks also remain a downside for the AUD, with China warning it is prepared for any type of war in response to Trump’s escalating trade tariffs. Given China’s status as Australia’s largest trade partner, these tensions could negatively impact the Australian Dollar.
US Dollar Steadies Ahead of Nonfarm Payrolls Report
The US Dollar Index (DXY) is trading around 104.10, as the Greenback faces downward pressure due to concerns over slowing US economic growth. Investors are awaiting the US Nonfarm Payrolls (NFP) report, which is expected to show a modest rebound in job growth, with projections for 160K net new jobs in February, up from 143K in January.
US Initial Jobless Claims for the week ending March 1 dropped to 221K, beating market expectations of 235K. However, the ADP Employment Change for February reported only 77K new jobs, well below the forecast of 140K, signaling some weakness in the labor market.
Atlanta Fed President Raphael Bostic expressed uncertainty about the US economy, indicating that the Fed remains committed to reducing inflation while minimizing disruptions to the labor market. The Federal Reserve’s Beige Book for March will be closely watched, with growing concerns over the economic impact of Trump’s trade policies.
Australia’s trade surplus in January rose to 5,620 million AUD, surpassing expectations, driven by a 1.3% rise in exports. Building permits surged 6.3% in January, and the Judo Bank Composite PMI showed continued, though slower, business activity growth.
Australian Dollar Technical Outlook
On the technical side, AUD/USD is trading near 0.6320, confined within an ascending channel, suggesting a bullish bias. The 14-day Relative Strength Index (RSI) remains above 50, supporting the positive outlook.
Key resistance is seen at the three-month high of 0.6408, followed by the upper boundary of the ascending channel at 0.6440. Immediate support lies at the 50-day Exponential Moving Average (EMA) at 0.6309, aligning with the lower boundary of the channel. A break below this support zone could lead to further declines, with a potential retest of the four-week low of 0.6187, recorded on March 5.
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