• AUD/USD edges up by 1%, boosted by a soft greenback.
• China’s Trade Balance surplus increased the appetite for the risk-sensitive AUD.
• The AUD/USD got bolstered by last week’s RBA’s tightening expectations.

The AUD/USD rallied during the North American session as the market mood turned mixed, with US equities fluctuating, while the greenback tumbles on the back of falling US Treasury bond yields after a strong US jobs report.

The AUD/USD is trading at 0.6980, shy of the day’s highs, reached late in the New York session. During the Asian session, the major gapped down and printed the daily low at 0.6897, but since never looked back, advancing sharply, towards 0.7009, before retracing to current price levels.

AUD/USD bolstered by China’s Trade Balance data, as the US dollar weakened

Last Friday’s US Nonfarm Payrolls report showed that the US economy added 528K employees, further cementing the case for the US Federal Reserve to continue its “aggressive” tightening path. That spurred a jump in US bond yields. Meanwhile, money market future STIRs expectations of a 75 bps rate hike for the FOMC’s September meeting, topping 90%.

Over-the-weekend, Fed’s board member Michelle Bowman crossed newswires. She said, “I supported the FOMC’s decision last week to raise the federal funds rate another 75 basis points,” and added that “similarly-sized” hikes should be on the table until we (the Fed) see inflation declining consistently.

Even though that’s positive for the greenback, the US Dollar Index is falling 0.20% at 106.370, undermined by diving US T-bond yields. Therefore, the AUD/USD is recording its largest gain since July 19.

During the Asian session, an absent Australian economic docket left traders leaning toward China’s data. Chinese exports grew at an 18% YoY pace, vs. 14.1% YoY estimations, up from June’s figures. Imports slowed to 2.3% YoY vs. 4.0% estimated. Consequently, the Trade Balance recorded a surplus of $101 B vs. $89 B foreseen.

That said, alongside last week’s Reserve Bank of Australia (RBA) signaling more tightening in the upcoming months, it was a tailwind for the Aussie. The AUD/USD rebounded near the 20-day EMA at 0.6904 and, on its way towards the daily high, reclaimed the 50-day EMA.

What to watch

The Australian economic docket will feature July’s NAB Business Conditions and Business Confidence. On the US front, the US calendar will feature July’s CPI, and PPI data on Wednesday and Thursday, respectively. That, alongside further Fed commentary led by Charles Evans, Neil Kashkari, and Mary Daly, would shed some light regarding the posture of the central bank.

AUD/USD Key Technical Levels