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7 Mar 2025
Australian Dollar falls after weak NFP data fuels risk aversion
- Australian Dollar weakens as disappointing US labor data increases risk-off sentiment.
- US NFP report came in below forecasts, while wages slowed, raising concerns over economic resilience.
- China’s trade data revealed weaker imports, amplifying pressure on the Aussie.
- Technical indicators suggest increasing downside risk as AUD/USD approaches key support levels.
The Australian Dollar extended losses on Friday against the USD after the release of the US Nonfarm Payrolls (NFP) report. The AUD/USD pair struggled to recover as risk sentiment deteriorated with traders reacting to weaker-than-expected job growth and softer wage gains. Meanwhile, China’s trade balance data showed an unexpected drop in imports, raising concerns over slowing demand, which weighed further on the Australian Dollar.
Daily digest market movers: Australian Dollar under pressure after NFP miss
- The US Nonfarm Payrolls report showed job creation slowed in February with 151,000 new jobs added, falling short of the 160,000 estimate. While still an improvement from January’s 125,000 figure, the weaker hiring pace raised concerns about labor market resilience.
- Average Hourly Earnings growth eased to 0.3% MoM, down from 0.4% in January, reinforcing expectations that wage pressure may be cooling. Meanwhile, the US Unemployment Rate edged up to 4.1%, signaling potential softening in labor conditions.
- China’s trade surplus widened to $170.52 billion in February, exceeding forecasts. However, a sharp 8.4% decline in imports raised concerns over weakening domestic demand, which could negatively impact Australia’s export-driven economy.
- The Reserve Bank of Australia (RBA) maintains a cautious outlook, expecting economic growth to moderate toward 2% by 2025. While this stance has supported AUD in the past, investors are becoming wary of possible policy shifts in response to inflation and labor market conditions.
- Risk sentiment soured as investors reassessed global trade developments. Canada delayed its planned second round of retaliatory tariffs against the US until April 2, following exemptions granted to Mexican and Canadian goods under the USMCA agreement. This development provided only temporary relief with broader concerns about global trade tensions persisting.
AUD/USD Technical Analysis: Selling pressure mounts as key support nears
The Australian Dollar extended its decline on Friday, dropping toward the 0.6290 region during the American session as selling pressure intensified. The pair failed to maintain its previous levels after the weaker-than-expected US NFP report increased market caution, prompting further downside movement.
The Moving Average Convergence Divergence (MACD) indicator continues to print decreasing red histogram bars, signaling weakening bullish momentum. Meanwhile, the Relative Strength Index (RSI) has fallen to 53, declining sharply but still above neutral levels. If the RSI continues to slide, it could confirm further downside risks.
A confirmed drop below the 0.6300 support zone could open the door for further losses with the next key level around 0.6270. On the upside, resistance remains at 0.6365 with a break above this level required to shift sentiment back toward the bulls.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.