Australian Dollar declines below 0.6959 as Trade Surplus shrinks sharply

The Australian Dollar (AUD) slipped below 0.6959 during the early Asian session on Thursday, as Australia's Trade Balance data came in lower than expected. Traders are watching the US weekly Initial Jobless Claims report and Fed speakers later in the day. In August, Australia's Trade Surplus narrowed to AUD$495 million, down from AUD$1,351 million the previous month, with exports up 3.7% month-over-month but imports climbing 5.8% MoM.

US inflation signs have reduced expectations of an immediate Federal Reserve rate hike, which could weigh on the US Dollar and support the AUD. The Personal Consumption Expenditures (PCE) Price Index increased 3.4% YoY in August, below market consensus, while Core PCE rose 3.0% YoY, cooler than expected. This could influence the Federal Reserve's decisions on interest rates.

Commerzbank's Volkmar Baur suggests the Reserve Bank of Australia (RBA) may wait to see how the economy develops before considering further rate hikes, as prior tightening effects linger. AUD/USD is trading below the 100-day simple moving average and the middle Bollinger band, suggesting bearish momentum. Potential resistance is at the 100-day SMA near 0.7060, with support at the lower Bollinger band at 0.6925.

The Reserve Bank of Australia (RBA) sets interest rates to maintain a 2-3% inflation target, influencing the AUD's value. China is a key trading partner, with its economic health affecting demand for Australian exports and the AUD's value. Iron Ore prices, Australia's top export, also impact the AUD; higher prices boost the currency, while lower prices weaken it.

The Trade Balance, the difference between exports and imports, further influences the AUD's strength.