Australian Dollar Plummets on Weak NFP, Risk-Off
- Australian Dollar feeling the pressure: US jobs data disappoints, sparking risk-off mood.
- US jobs report misses the mark, wages growth slows – is the economy losing steam?
- China’s imports weaken, adding to the Aussie’s woes.
- Technical charts hint at further Aussie downside as it tests crucial support.
The Australian Dollar took a hit on Friday, stumbling against the US Dollar after the latest US jobs numbers were released. It’s been an uphill battle for the AUD/USD pair to bounce back, as market jitters intensified in response to weaker-than-expected job creation and slower wage increases. Adding to the Aussie’s troubles, new data from China revealed a surprising dip in imports, fueling concerns about cooling demand and further weighing on the currency.
Daily digest market movers: Aussie Dollar on shaky ground after US jobs stumble
- The US jobs market showed signs of cooling in February, with Nonfarm Payrolls revealing 151,000 new jobs added – a step down from the anticipated 160,000. While still an improvement on January’s 125,000, this slower pace of hiring has raised eyebrows about just how robust the labor market really is.
- Wage growth also showed signs of easing. Average Hourly Earnings rose by 0.3% month-on-month, a touch softer than January’s 0.4%. This reinforces the idea that wage pressures might be starting to cool down. Meanwhile, the US Unemployment Rate ticked up slightly to 4.1%, hinting at potential cracks in the labor market’s foundation.
- China, a key player in global trade, saw its trade surplus widen to a hefty $170.52 billion in February, beating expectations. However, digging deeper, there was a worrying 8.4% plunge in imports. This suggests a slowdown in domestic demand within China, which could have ripple effects, particularly for export-driven economies like Australia.
- Australia’s central bank, the RBA, is playing it cautiously, anticipating a gradual moderation in economic growth towards 2% by 2025. While this steady approach has offered some support to the Aussie in the past, investors are starting to wonder if the RBA might need to shift its stance in response to evolving inflation and job market dynamics.
- Market sentiment took a turn for the worse as investors grappled with the evolving global trade landscape. Canada’s decision to postpone the next round of retaliatory tariffs against the US, until April 2nd, offered a brief moment of calm. This followed exemptions for Mexican and Canadian goods under the USMCA agreement. However, this relief proved fleeting as broader anxieties about persistent global trade tensions lingered in the air.
AUD/USD Technical Analysis: Selling pressure builds as key support looms
The Australian Dollar continued its downward trajectory on Friday, sliding towards the 0.6290 level during the US trading session as selling momentum gathered pace. The pair struggled to hold onto earlier gains after the weaker-than-expected US jobs report injected caution into the market, triggering a fresh wave of selling.
Looking at the technical indicators, the Moving Average Convergence Divergence (MACD) is still showing diminishing red bars in its histogram, a sign that bullish momentum is fading. At the same time, the Relative Strength Index (RSI) has dropped to 53 – a notable fall, although it remains just above neutral territory. If the RSI continues to drift lower, it could further validate the potential for more downside.
Should the price break decisively below the 0.6300 support area, it could pave the way for further losses, with the next significant level of support around 0.6270. On the flip side, resistance is still holding at 0.6365. To see a shift back towards a more positive outlook, the price would need to convincingly break above this resistance level.
Australian Dollar FAQs
Lots of things influence the Aussie Dollar (AUD), but interest rates from Australia’s central bank (RBA) are a big one. Because Australia has loads of natural resources, the price of iron ore – their top export – is also key. Don’t forget about China’s economy, Australia’s biggest trading buddy – their economic health matters a lot. Inflation in Australia, how fast the Aussie economy is growing, and their Trade Balance all play a part too. And finally, just the general mood of investors – are they feeling bold and taking risks (risk-on), or playing it safe and seeking shelter (risk-off)? Risk-on usually gives the Aussie a boost.
The Reserve Bank of Australia (RBA) is like the conductor of the Aussie Dollar (AUD) orchestra, mainly through setting interest rates. They decide the rate at which Australian banks lend money to each other, and this ripples out to affect interest rates across the whole economy. The RBA’s main job is to keep inflation nice and steady, within a 2-3% target range. They do this by tweaking interest rates up or down. Higher interest rates in Australia compared to other big economies tend to make the Aussie more attractive, and vice-versa. The RBA can also use tools like quantitative easing (pumping money into the economy) or tightening (pulling money out) which can also influence the Aussie – easing is generally bad for the AUD, while tightening is usually good.
China and Australia are close trading partners, so what’s good for China’s economy is often good for the Aussie Dollar (AUD). When China’s economy is doing well, they buy more raw materials, goods, and services from Australia. This increased demand for Aussie products also boosts demand for the Aussie Dollar, pushing its value up. The opposite happens when China’s economy slows down. So, any surprising news – good or bad – about China’s economic growth often has a direct and immediate impact on the Australian Dollar.
Iron Ore is Australia’s biggest export earner, bringing in a whopping $118 billion annually (as of 2021 data), with China being the main customer. So, the price of iron ore can be a real driver for the Australian Dollar. Generally speaking, if iron ore prices go up, the Aussie tends to follow suit, as demand for the currency increases. The reverse is also true – falling iron ore prices can weigh on the AUD. Higher iron ore prices often also mean Australia’s trade balance looks healthier, which is another plus for the Aussie.
Think of the Trade Balance as Australia’s economic scorecard – it’s the difference between what the country earns from exports and what it spends on imports. If Australia is exporting in-demand stuff, then foreign buyers need to buy Aussie Dollars to pay for those exports. This extra demand for the AUD can push its value higher. So, a positive Trade Balance (more exports than imports) generally strengthens the Aussie, while a negative Trade Balance can have the opposite effect.
