Key Us Data And Geopolitical Risk
In the US, ADP payrolls and the ISM Services PMI beat forecasts on Wednesday. US Nonfarm Payrolls, the unemployment rate, and January retail sales are due Friday, while conflict in the Middle East and the Strait of Hormuz closure has supported USD safe-haven demand. AUD/USD traded at 0.7079, above rising 50-day and 200-day exponential moving averages, with the Stochastic easing from overbought levels. Support is near 0.7040 and 0.7000, with the 50-day EMA around 0.6930; resistance sits near 0.7120 and then 0.7160. AUD drivers include RBA policy, a 2–3% inflation target, China’s economy, trade balance, and iron ore, worth $118 billion a year in 2021. Looking back to early 2025, we recall a period of optimism for the Aussie dollar, fueled by strong fourth-quarter GDP growth of 2.6% annually. This strength supported the Reserve Bank of Australia’s decision to raise rates to 3.85% at the time. Today, however, the landscape has shifted, with AUD/USD trading significantly lower around 0.6650.Outlook And Strategy Considerations
The series of rate hikes that followed the period in 2025, peaking at 4.35%, have clearly cooled the economy as intended. The most recent data for the fourth quarter of 2025 showed annual growth slowing to just 1.5%, a noticeable drop from the robust pace seen a year prior. This slowdown suggests the RBA will remain on hold for the foreseeable future, removing a key pillar of support for the currency. Furthermore, the outlook for Australia’s key trading partner, China, has softened, which weighs on the Aussie. Recent figures like the Caixin Manufacturing PMI dipping to 49.8 show a manufacturing sector in slight contraction. This has contributed to iron ore prices falling to around $115 per tonne, well off their highs from last year. Given the divergence, where the US economy remains resilient and keeps the Fed on a ‘higher-for-longer’ path, the path of least resistance for AUD/USD appears to be lower. Unlike the range-bound trading we saw around 0.7100 in early 2025, the current trend is decidedly downward. Derivative traders may consider buying put options to hedge or speculate on further downside, especially with key support levels now under pressure. Create your live VT Markets account and start trading now.
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