The Australian dollar held firm on Wednesday, benefiting from a weaker US dollar as investors positioned ahead of the upcoming ISM Manufacturing PMI report. The greenback’s struggles have allowed the Aussie to maintain stability, with risk sentiment and commodity prices offering additional support.
The US dollar remains under pressure, as markets continue to assess the Federal Reserve’s next move. While Fed officials have maintained a cautious stance on rate cuts, recent economic data has suggested signs of slowing momentum in the US economy. If the ISM Manufacturing PMI comes in weaker than expected, it could reinforce expectations that the Fed will have to ease policy later this year, further weighing on the dollar.
Meanwhile, the Australian dollar has found support from improving risk appetite and resilience in key commodity markets. Iron ore prices, a major driver of Australia’s export economy, have remained firm, providing an additional boost to the currency. Market participants are also watching domestic economic conditions, as the Reserve Bank of Australia (RBA) continues to monitor inflationary pressures.
AUD/USD 1-D Chart as of March 03, 2025 (Source: TradingView)
Despite the Aussie’s recent strength, traders remain cautious about potential downside risks. Any unexpected hawkish tilt from the Fed or renewed concerns about China’s economic slowdown a key trading partner for Australia—could limit further gains. The US jobs data due later this week will also be closely watched, as it could impact Fed expectations and shift momentum in currency markets.
Technical analysts note that AUD/USD faces key resistance levels near 0.6600, and a break above this zone could open the door for further upside. However, if US economic data surprises to the upside, the pair could retreat, with support seen near 0.6520.
For now, the Australian dollar remains well-supported, with traders awaiting clearer signals from both the Federal Reserve and global risk sentiment. The upcoming ISM data could set the tone for the next major move, making the next trading sessions crucial for AUD/USD’s near-term direction.
