AUD/USD rises as Australia reports record trade surplus; NFP data ahead

on Jul 2, 2020
  • The AUD/USD rose slightly after the Bureau of Statistics reported a record surplus of more than $8 billion.
  • The surplus happened as exports declined by 4% while imports declined by 6% after sharper declines in April.
  • The pair is now waiting for the US Nonfarm payrolls (NFP) data that will come out later today.

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The AUD/USD pair rose slightly during the Asian session as traders reacted to the upbeat Australian trade numbers. They are also reacting to the FOMC minutes released yesterday, the rising number of coronavirus cases in the US, and the NFP data.

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AUD/USD rises slightly as trade surplus rises

Australia record trade surplus

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Australia recorded a record trade surplus in May as the country reopened following the recent lockdowns. Data from the Australian Bureau of Statistics (ABS) showed that the surplus increased by more than $195 million to $8.02 billion. The surplus is calculated by subtracting a country’s imports from exports.

In May, the country’s goods and services exports declined by 4% to $35.7 billion. This decline was better than the previous month’s contraction of 11%. Non-monetary gold exports fell by 10% while services rose by 2%. Non-rural goods declined by 4%.

At the same time, imports declined by 6% to $27.7 million. That was better than the April’s decline of 10%. Consumption goods declined by 14% but were offset by a 113% increase in non-monetary gold.

These numbers show that Australia’s economy started rebounding in May as the country started to reopen. This is partly because of the country’s reliance on China, which is its biggest trading partner.

The trade number came a day after we received the upbeat Australian manufacturing PMI data. According to the Australian Industry Group (AIG), the manufacturing PMI rose to 51.5 while another data by Markit showed the PMI at 51.2.

AUD/USD awaits nonfarm payrolls

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The AUD/USD will react to the nonfarm payrolls data from the United States. Analysts polled by Reuters expect that the economy created more than 3 million jobs in June as the country reopened. They also believe that the unemployment rate fell to 12.3% while the average weekly hours dropped from the previous 34.7 to 34.5.

Also, we will receive last week’s jobless claims data, which are expected to show that more than 1 million signed for these claims. In a note, Seth Carpenter of UBS said:

“Low-wage workers bore the brunt of recent months’ net decline in employment. As they return, the compositional shift in employment pushes down average hourly earnings.”

Still, the biggest challenge for the US labour market is that the number of coronavirus cases is rising. Health officials reported more than 52,000 new cases with California and Texas reporting record numbers. That was the highest number ever recorded since the pandemic started.

As a result, many companies are starting to rethink their reopening plans. Apple has closed some of its stores while McDonalds is also considering closing stores. In New York, the government has ordered restaurants to only serve take away food.

Meanwhile, the Fed minutes showed that the officials are still debating yield curve control. This is a situation in which the central bank buys as much treasury bonds as possible to keep the yields low. The strategy has been used in Japan and Australia.

AUD/USD technical analysis

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AUD/USD technical forecast

The AUD/USD pair is trading at 0.6920, which is higher than yesterday’s low of 0.6876. On the daily chart, the pair is above the 50-day and 100-day exponential moving averages. It has also formed a bullish pennant pattern that is shown in pink. Therefore, the pair is likely to move higher today as bulls target the YTD high of 0.7065. On the other hand, a clear break below the lower side of the pennant at 0.6835 will see the price continue to fall.

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