AUD/USD strives to hold 0.6430, investors shift focus to US NFP

The AUD/USD pair attempts to hold the immediate support level of 0.6430 during the European trading session on Thursday. The Aussie pair attracts slight bids on upbeat Australian Retail Sales data for June, released earlier in the day. Australian Bureau of Statistics reported that Retail Sales, a key measure of consumer spending, rose at a faster pace of 1.2% on month.

AUD/USD Technical Overview

AUD/USD is trading around 0.6450 on Thursday. The daily chart’s technical analysis indicates a bearish bias as the 14-day Relative Strength Index (RSI) has moved below the 50 mark. Additionally, the pair remains below the nine-day Exponential Moving Average (EMA), indicating that short-term price momentum is weaker.

On the downside, the AUD/USD pair could find the primary support at the monthly low of 0.6426, which was recorded on July 30. A break below this level could put downward pressure on the pair to test a two-month low at 0.6372, recorded on June 23.

The AUD/USD pair may target the initial barrier at the 50-day EMA of 0.6498, followed by the nine-day EMA of 0.6506. A break above these levels could strengthen the short- and medium-term price momentum and support the pair to explore the region around the eight-month high at 0.6625.

Fundamental Overview

Better-than-projected Retail Sales data is unlikely to force traders to pare supporting interest rate cuts by the Reserve Bank of Australia (RBA) in the policy meeting in August. Traders are increasingly confident that the RBA will cut borrowing rates next month as inflationary pressures have cooled down significantly. The data on Wednesday showed that the Australian Consumer Price Index (CPI) rose moderately by 0.7% in the second quarter of the year.

Meanwhile, sheer strength in the US Dollar will keep the Aussie pair on the tenterhooks. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, holds onto gains near a fresh two-month high around 100.00.

The US Dollar strengthens as traders pare Federal Reserve (Fed) dovish bets for the September meeting after Chairman Jerome Powell signaled that there is no rush for interest rate cuts.

Going forward, investors will focus on the US Nonfarm Payrolls (NFP) data for July, which is scheduled to be released on Friday. The NFP report is expected to show that employers added 110K, lower than 147K in June.

Australian Dollar advances as US Dollar halts winning streak

The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is halting its winning streak and trading around 99.80 at the time of writing. However, the Greenback gained ground after the Federal Reserve (Fed) decided to hold its benchmark federal funds rate in a range of 4.25%-4.5% at its July meeting on Wednesday, as widely expected.

Fed Chair Jerome Powell said in a post-policy conference that the US central bank has "made no decisions" about a potential policy change in September, and it may take a bit to assess the effect of tariffs on consumer prices.

US Gross Domestic Product (GDP) expanded at an annual rate of 3.0% for the April through June period. This figure followed the 0.5% contraction in the first quarter and came in stronger than the expectation of 2.4%.

US Treasury Secretary Scott Bessent said that the US and China will continue talks over maintaining a tariff truce before the deadline in two weeks, and Trump will make the final decision on any extension. Bessent tamped down any expectation of Trump rejecting the extension. It is important to note that any changes in the Chinese economy could impact the AUD as China and Australia are close trade partners.

China’s Finance Minister Lan Fo’an said on Tuesday that the country will ramp up fiscal support to bolster domestic consumption and mitigate mounting economic headwinds. He emphasized that uncertainty around China’s development environment is growing and Beijing will adopt more proactive fiscal policies to help stabilise growth.

Australia’s Consumer Price Index (CPI) rose 0.7% quarter-over-quarter in the second quarter, against the 0.9% increase in Q1 and the expected growth of 0.8%. Annually, CPI inflation eased to 2.1% in Q2, compared to 2.4% prior and below the market consensus of 2.2%.

The monthly Consumer Price Index rose by 1.9% YoY in June, compared to the previous reading of a 2.1% increase. The RBA Trimmed Mean CPI for Q2 rose 0.6% and 2.7% on a quarterly and annual basis, respectively. Markets estimated an increase of 0.7% QoQ and 2.7% YoY in the quarter to June.