Above 0.7000: Australian Dollar stabilises as strong trade surplus and subdued USD provide support

• The Australian Dollar holds above 0.7000. A softer US Dollar and improved Australian trade figures underpin the consolidation.
• Higher exports and lower imports pushed Australia's trade surplus wider in September.
• Ahead of key US employment figures, the Reserve Bank of Australia's cautious policy outlook caps the upside.

AUD/USD is trading around 0.7010 at the time of writing on Thursday. The pair is up a modest 0.04% on the day, maintaining its consolidation above 0.7000. Continued US Dollar (USD) weakness and positive Australian trade figures support the Australian Dollar (AUD), although the Reserve Bank of Australia's (RBA) cautious monetary policy outlook remains a constraint.

Australia's September trade surplus reached A$2.826M, up from A$184M in the preceding month, according to figures published on Thursday by the Australian Bureau of Statistics (ABS). The initial estimate for August was A$495 million. Exports increased 2.3% in September after a revised 3.1% rise in August. Imports, by contrast, fell 3.3% following a revised 6.2% gain a month earlier. The marked improvement in Australia's trade balance offers further support to the Aussie.

Tuesday's dovish RBA message nevertheless continues to restrain AUD/USD. Although the central bank increased interest rates, it indicated greater caution over subsequent policy decisions. Growing employment risks were highlighted, while explicit references to further rate rises were dropped from the 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 after the United States (US) midterm elections is also supporting AUD/USD. With the Democrats winning both chambers of Congress, concerns have emerged over possible political gridlock in Washington. Such an outcome could hinder budget negotiations and the administration's economic agenda.

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

The US economy's resilience, evident in these figures, supports expectations that the Federal Reserve (Fed) will tighten monetary policy further. Markets are currently pricing in roughly an 81% probability of a December interest rate increase, according to the CME FedWatch tool.

Thursday's US Initial Jobless Claims are next in focus, followed by the more significant Nonfarm Payrolls (NFP) report on Friday. Investors will look to both releases for further evidence of US labour market strength. The figures could influence expectations for the Fed's next policy decision and, in turn, the direction of AUD/USD.

AUD/USD: technical outlook

On the one-hour chart, the mildly constructive AUD/USD setup places the pair at 0.7012. Price remains above both the 100-period simple moving average (SMA), near 0.7004, and rising trend-line support around 0.7008. The 200-period SMA at 0.7018, however, continues to cap gains. At around 54, the Relative Strength Index (RSI) sits just above 50, suggesting modest bullish momentum that is not yet sufficient to deliver a decisive break above immediate resistance.

The first upside hurdle is the 200-period SMA at 0.7018. Beyond it, horizontal resistance stands at 0.7040 and 0.7068. Support initially lies along the rising trend line near 0.7008, ahead of the 100-period SMA at 0.7004. A larger retreat would bring the psychological 0.7000 level into view, followed by the more distant horizontal support at 0.6954.

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