Thursday really belonged to the US Dollar, not the Aussie. When soft American payrolls data landed, AUD/USD spiked toward 0.6950 on the release, only to hand back most of that move and close well off its high. The irony is that Australia's own numbers improved in the same window. The S&P Global composite Purchasing Managers Index (PMI) crept back into expansion at 50.4, with services at 50.5, both back above the 50 growth line. The market did not care. The Aussie simply rode along as a passenger to the Dollar, exactly as it has done all quarter.
The live tape tells the same story. According to live market data, AUD/USD is changing hands near 0.6918, up roughly 0.38% from the previous close of 0.6892. The daily RSI(14) reads 36, a sign that selling pressure still has the upper hand even as the pair edges toward oversold territory.
Why It Stays Weak Despite a Hawkish RBA
The awkward part is that this weakness runs against the textbook, because the Reserve Bank of Australia (RBA) is one of the most hawkish central banks in the developed world. It has hiked three times in 2026 to 4.35%, held there in June, and flagged that it could go higher still. Underlying inflation is not cooperating; the trimmed mean rate rose to 3.6% in May as firms passed on an energy shock that is only now beginning to fade.
That leaves the Aussie with a 60 basis point rate advantage over the Fed, the kind of gap that should normally pull in buyers. It has not. The market treats the hikes as a problem rather than a prize. The very tightening that flatters the carry story is also biting into a slowing economy, where unemployment sits near 4.5% and growth is barely crawling.
Trade added to the pain. In May the balance swung from surplus to a deficit of roughly $3.0 billion, against an expected $2.2 billion surplus, as exports slumped 6.9% on the month. For an economy built on selling commodities to Asia, a lost surplus strips away a key support. Those PMI surveys back above 50 may argue that the private sector is not rolling over as fast as the hard data suggests, but the tape is watching the trade deficit and China, not the survey.
The Technical Picture: Resistance and Support
Resistance: The spike high near 0.6950 is the first cap, the level the rally could not hold. Above it, the 0.7000 handle marks the shelf the pair fell from in late June, and that becomes the first real test for any recovery.
Support: The 200-day Exponential Moving Average (EMA) around 0.6900 has held as the floor over the past fortnight. A daily close below there opens the late-June low close to 0.6850, with 0.6800 the next reference beneath. The daily Stochastic oscillator is deeply oversold and trying to flatten, which argues that the immediate downside is tired rather than turning.
Bias: Lower. The Aussie keeps failing at 0.6950, and until it posts a daily close above that level, the base is a pause and not a bottom. The hawkish RBA argues against pressing fresh shorts at 0.6900 support, but it is no reason to chase the Aussie higher either. Thursday's fade of the payrolls spike says buyers are absent. The path of least resistance is a grind toward 0.6900, with a break below opening 0.6850 if China or US data disappoints.
The Real Drivers of the Australian Dollar
One of the most significant factors for the Australian Dollar is the level of interest rates set by the Reserve Bank of Australia. 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, matters too, along with Australia's own inflation, its growth rate and its Trade Balance. Market sentiment also plays a role, meaning whether investors are reaching for riskier assets (risk-on) or seeking safe havens (risk-off), with a risk-on mood positive for the Aussie.
How the RBA Moves the Currency
The Reserve Bank of Australia influences the currency by setting the rate at which Australian banks lend to each other, which in turn shapes interest rates across the whole economy. Its main goal is to keep inflation stable in a 2-3% band by adjusting rates up or down. Relatively high rates compared with other major central banks support the Aussie, while relatively low rates do the opposite. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former negative for the currency and the latter positive.
The China Factor
China is Australia's largest trading partner, so the health of the Chinese economy has a major influence on the value of the Australian Dollar. When China's economy is doing well, it buys more raw materials, goods and services from Australia, lifting demand for the currency and pushing its value up. The reverse happens when Chinese growth comes in slower than expected. That is why positive or negative surprises in Chinese growth data often feed straight through to the Australian Dollar and its pairs.
Iron Ore and the Trade Balance
Iron Ore is Australia's largest export, worth $118 billion a year according to 2021 data, with China as its primary destination. The price of Iron Ore can therefore drive the currency. Generally, if the price of Iron Ore rises, the Aussie goes up as aggregate demand for it increases, and the opposite holds if Iron Ore falls. Higher Iron Ore prices also raise the odds of a positive Trade Balance for Australia, which is itself supportive for the currency.
The Trade Balance, the difference between what a country earns from its exports and what it pays for its imports, is another factor that shapes the value of the Australian Dollar. If Australia produces highly sought-after exports, its currency gains value purely from the surplus demand created by foreign buyers, set against what it spends on imports. A positive net Trade Balance therefore strengthens the currency, with the opposite effect when the balance turns negative.
How the Wider Market Looked
Across the broader currency market, the US Dollar was under pressure on Thursday too. Following the softer-than-expected US non-farm payrolls report for June, GBP/USD traded well above the 1.3300 barrier and looked to challenge 1.3400 before long. EUR/USD left behind two straight daily pullbacks and advanced to multi-day peaks near 1.1470, partially offsetting the sharp decline in place since June. Gold extended its bullish momentum, climbing above $4,100 per troy ounce to reach its highest level in a week as the Dollar retreated after the disappointing payrolls data. US markets will be closed on Friday for the Independence Day holiday.
The Fed remains firmly in view as well. Financial markets had been hunting for clues about the central bank's next move, but they largely came away with confirmation that Fed Chair Kevin Warsh intends to make those clues much harder to find.
