Australian Dollar drifts higher above 0.6950 on soft US jobs data

AUD/USD gains ground to near 0.6955 in Monday’s early Asian session.
US Nonfarm Payrolls fell short of expectations in September.
Markets expect the RBA will likely hold rates steady at its November policy meeting.

The AUD/USD pair edges higher to around 0.6955 during the earlyAsian session on Monday. Weaker-than-expected US jobs data weighs on the US Dollar (USD) against the Australian Dollar (AUD). Traders await the release of the US ISM Services Purchasing Managers Index (PMI) report later on Monday.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Data released by the US Bureau of Labor Statistics on Friday showed that Nonfarm Payrolls rose by 29,000 jobs in September, followed by 133,000 in August (revised from 162,000). This figure came in below the market consensus of 90,000.

Expectations for a Federal Reserve (Fed) interest rate hike later this month fell after softer US jobs data. Markets are now pricing in nearly a 22.1% probability of a Fed rate hike in October and an 87.2% chance of an increase in December, according to the CME FedWatch Tool.

On the Aussie front, the odds of the Reserve Bank of Australia (RBA) raising interest rates in November have fallen sharply after the latest Consumer Price Index (CPI) came in line with expectations. Money markets are now betting the Australian central bank will likely leave rates unchanged at its November policy meeting. The probability of a rate hike fell to around 20%, data from LSEG showed.

RBA seen on hold as softer inflation and housing strain cap Aussie upside

Analysts at Commerzbank argue that the latest data underscore why “1.5 additional rate hikes by the RBA – as the market was still expecting yesterday – are likely to be too much.” One day after the Reserve Bank of Australia’s monetary policy meeting, they note that the CPI figures released today “also show” the case for caution, even though “there’s no question that inflation is still too high, and it will take a while before it returns to the middle of the target range.”

Commerzbank stresses that “interest rate hikes always take effect with a certain time lag,” and points in particular to the real estate sector, “where building permits fell again in August by 6.1% compared to the previous month and prices in the largest cities continue to decline.” Against this backdrop, the bank judges that “the RBA would likely be well advised to wait and see how things develop in the coming months.” In turn, they conclude that “the AUD is unlikely to receive any further tailwind.”

Logan’s hawkish tilt lifts Fed sentiment and supports the Dollar

Fed’s Logan delivered a notably more hawkish message, with the FXS Speechtracker score at 9.2/10, well above the 8.1/10 historical average, underscoring a stronger tightening bias relative to the established baseline. The emphasis that higher yields may reflect increased term premiums, potentially reducing the need for further aggressive tightening, sits alongside explicit calls for at least 50 bps more in rate hikes and several additional moves, reinforcing a view that policy is not yet restrictive enough and that inflation will not reach 2% without higher rates, a mix that is broadly supportive for the Dollar. Overall, the speech signals confidence in economic expansion and a balanced labor market, but with a clear priority on reviving price stability through additional tightening.

The FXS Fed Sentiment Index rose by 1.68 points to 136.59, confirming a solid move deeper into hawkish territory and aligning with the elevated FXS Speechtracker reading. With the index far above the neutral 100 mark, the data point reinforces expectations for further policy rate increases and keeps the Dollar underpinned against the Euro and Yen.

Technical Analysis: AUD/USD keeps a bearish vibe below the 100-day

In the daily chart, AUD/USD keeps a bearish near-term tone as spot holds beneath the 100-day simple moving average (SMA) and the Bollinger middle band SMA. Price is now leaning toward the lower half of the recent volatility envelope, while the Relative Strength Index (14) at 31.5 hovers just above oversold territory, hinting that downside momentum is still dominant but increasingly stretched.

On the topside, initial resistance is seen at the 100-day SMA at 0.7055, followed by the Bollinger middle band around 0.7070; a daily close above these levels would be needed to ease immediate selling pressure before the next barrier at the Bollinger upper band near 0.7250. On the downside, the Bollinger lower band at 0.6895 offers the first notable support, where failure to hold could open the way toward fresh lows in the broader bearish sequence.

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

Australian Dollar FAQs

What key factors drive the Australian Dollar?

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

How does the health of the Chinese Economy impact the Australian Dollar?

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

How does the price of Iron Ore impact the Australian Dollar?

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

How does the Trade Balance impact the Australian Dollar?

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

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