AUD/USD Firmer as Australian Trade balance Grows
AUD/USD is slightly higher on Thursday after Australia’s trade balance data came in much higher than analyst’s forecasts.
The trade balance data showed Australia’s exports outpaced imports by A$17.67 billion in June. This was higher than the forecast A$14.00 billion and the A$15.1b in May. As a result, the Aussie is up +0.2% against the buck, extending its two-day recovery to +1.1%.
The Australian dollar has climbed almost 4.5% against the US dollar since mid-July, as it attempts to reverse the US dollar’s relentless strength this year. The American currency has risen sharply in 2022, lifting the US dollar index (DXY) to a 20-year high in July.
Several factors are behind the dollar strength, including the aggressive tightening cycle in the US, flight-to-quality flows from struggling emerging markets economies and more recently, safe-haven buying.
The trade balance data is helping to offset the negative tone earlier this week when the Reserve Bank of Australia (RBA) raised interest rates by 50bp. Although the rate hike was expected, the central bank’s tone wasn’t. The RBA’s statement following the policy adjustment, hinted it may pullback from its aggressive tightening cycle.
“The Board expects to take further steps in the process of normalizing monetary conditions over the months ahead, but it is not on a pre-set path. The size and timing of future interest rate increases will be guided by the incoming data and the Board’s assessment of the outlook for inflation and the labor market.”
Australian Dollar to US Dollar Outlook
The daily price chart shows the Australian dollar is attempting to break out from a long-term downtrend.
The recent price action is constructive and points to more Aussie strength. However, the pair is grappling with the 50-Day Moving Average (DMA) at 0.6957 (green line). If AUD/USD closes today above the indicator, it’s likely to push higher in the days ahead. Here, the 100-DMA at 0.7108 is a logical price target.
Below the market, trend line support at 0.6900 adds to the bullish outlook. As does, the Relative Strength Index (RSI), which is turning higher.
With this in mind, the immediate outlook is positive for the Australian dollar. However, failure to clear the 50-DMA could be viewed as a exchaustion, and the start of a bearish reversal.