Australian Dollar holds above 0.7000 as strong trade surplus and subdued USD provide support

• Stronger Australian trade figures and a softer US Dollar help the Australian Dollar consolidate above 0.7000.
• Higher exports and lower imports pushed Australia's trade surplus wider in September.
• Ahead of crucial US employment figures, the Reserve Bank of Australia's cautious policy outlook keeps gains in check.

Encouraging Australian trade figures and continued US Dollar (USD) weakness are supporting the Australian Dollar (AUD), although the Reserve Bank of Australia's (RBA) cautious monetary policy outlook remains a constraint. On Thursday, AUD/USD is consolidating above 0.7000, changing hands at around 0.7010 at the time of writing, a modest daily gain of 0.04%.

Australia's trade surplus increased from A$184M in the previous month to A$2.826M in September, according to figures published on Thursday by the Australian Bureau of Statistics (ABS). The initial estimate for August had been A$495 million. Following a revised 3.1% rise in August, exports grew by 2.3% in September. Imports, by contrast, fell 3.3%, reversing the previous month's revised 6.2% increase. The marked improvement in Australia's trade balance offers further support to the Aussie.

Tuesday's dovish message from the RBA is nevertheless restraining gains in AUD/USD. Although the Australian central bank increased interest rates, it indicated that future monetary policy decisions would be approached more cautiously. Alongside highlighting mounting employment risks, the RBA dropped explicit references to further interest rate rises from its policy statement for the first time since June. Expectations of another increase in December have consequently eased, curbing the Australian Dollar's scope to advance.

Broad US Dollar weakness following the United States (US) midterm elections is also lending support to AUD/USD. With the Democrats winning both chambers of Congress, concerns have emerged over possible political gridlock in Washington. This could make budget negotiations and progress on the administration's economic agenda more difficult.

Recent US economic releases, however, could put a brake on further US Dollar declines. Wednesday's ADP Employment Change report put October's private-sector job gains at 86K, above the expected 69K. The Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI), meanwhile, slipped from 54.9 to 54.5. It nonetheless held above 50, the threshold indicating an expansion in economic activity.

The data underline the US economy's resilience, supporting expectations that the Federal Reserve (Fed) will tighten monetary policy further. Markets currently assign around an 81% probability to a December interest rate rise, according to the CME FedWatch tool.

Thursday's US Initial Jobless Claims release is now in focus, followed by the more significant Nonfarm Payrolls (NFP) report on Friday. By shedding further light on the strength of the US labour market, the figures could influence expectations for the Fed's next monetary policy decision and, in turn, the direction of AUD/USD.

AUD/USD technical analysis: Pair retains a modest bullish bias

At 0.7012 on the one-hour chart, AUD/USD retains a mildly positive bias. Support comes from its position above both the 100-period simple moving average (SMA), near 0.7004, and rising trend-line support around 0.7008. However, the 200-period SMA at 0.7018 continues to cap the pair. With the Relative Strength Index (RSI) near 54, just above the 50 line, bullish momentum appears modest and is not yet sufficient to drive a decisive break through the immediate resistance.

The first upside obstacle is the 200-period SMA at 0.7018, ahead of horizontal resistance at 0.7040 and 0.7068. Below the current price, the rising trend line near 0.7008 offers immediate support, with the 100-period SMA at 0.7004 next in line. A more pronounced retreat would bring the psychological 0.7000 level into view, followed by the lower horizontal support at 0.6954.

(The technical analysis of this story was written with the help of an AI tool. Know more.)