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

• A softer US Dollar and improved Australian trade figures underpin the Australian Dollar as it consolidates above 0.7000.
• Higher exports and lower imports helped widen Australia's trade surplus in September.
• Ahead of crucial US employment releases, the Reserve Bank of Australia's cautious policy outlook caps the currency's advance.

Support from a persistently weaker US Dollar (USD) and positive Australian trade figures keeps the Australian Dollar (AUD) on a steady footing, although the Reserve Bank of Australia's (RBA) cautious monetary policy outlook restrains gains. On Thursday, AUD/USD is consolidating above 0.7000, with the pair trading near 0.7010 at the time of writing, a modest gain of 0.04% for the day.

An improved trade balance is lending further support to the Aussie. Data published on Thursday by the Australian Bureau of Statistics (ABS) showed that Australia's September trade surplus expanded to A$2.826M, compared with A$184M a month earlier. The initial estimate for August was A$495 million. Exports increased by 2.3% in September after a revised rise of 3.1% in August. Imports, by contrast, fell 3.3%, reversing the previous month's revised 6.2% increase. Together, the figures point to a substantial improvement in Australia's trade balance.

The RBA's dovish messaging on Tuesday nevertheless continues to constrain gains in AUD/USD. Although the Australian central bank increased interest rates, it indicated that future policy decisions would follow a more cautious approach. Alongside flagging mounting employment risks, the RBA dropped explicit references to additional rate increases from its policy statement for the first time since June. Expectations of a further hike in December have eased following this change in communication, curbing the Australian Dollar's scope to rise.

Broad weakness in the Greenback after the United States (US) midterm elections is also supporting AUD/USD. Concerns over possible political gridlock in Washington have increased following the Democrats' victory in both chambers of Congress. Such a deadlock could make budget negotiations and the administration's economic agenda more difficult.

Further US Dollar declines could, however, be checked by recent US economic releases. Wednesday's ADP Employment Change report put October private-sector job additions at 86K, above the expected 69K. Separately, the Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI) slipped from 54.9 to 54.5. Despite the decline, the index held above 50, the threshold indicating an expansion in economic activity.

Expectations that the Federal Reserve (Fed) will tighten monetary policy further have been reinforced by these signs of US economic resilience. Markets are currently assigning roughly an 81% probability to a December interest rate increase, according to the CME FedWatch tool.

Thursday's US Initial Jobless Claims release is next on investors' radar, ahead of the more closely watched Nonfarm Payrolls (NFP) report on Friday. By offering fresh indications of US labour market strength, the releases could influence expectations for the Fed's next policy decision and, in turn, the direction of AUD/USD.

AUD/USD technical analysis: can the pair clear nearby resistance?

A mildly positive technical bias prevails on the one-hour chart, where AUD/USD is trading at 0.7012. The pair remains 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 upside. With the Relative Strength Index (RSI) near 54, slightly above the 50 mark, bullish momentum appears modest and is not yet strong enough to deliver a decisive move through the immediate resistance.

The first upside hurdle is the 200-period SMA at 0.7018, followed by horizontal resistance at 0.7040 and 0.7068. For support, the rising trend line near 0.7008 comes first, ahead of the 100-period SMA at 0.7004. A more pronounced retreat would bring the psychological 0.7000 level into focus, 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.)