**USD Strengthens Ahead of ADP Report, AUD/USD Targets Crucial Support Near 0.6420**
*Original Analysis by Thomas Westwater (FXStreet), Enhanced and Expanded*
—
### Introduction
The US dollar is asserting strength across the currency markets, reinforcing its recent upward trajectory as investors await the ADP employment report. In contrast, the Australian dollar is experiencing downward pressure, with AUD/USD approaching a critical technical support zone around 0.6420. This article provides an in-depth analysis of recent forex developments, technical levels, and macroeconomic influences shaping USD, AUD/USD, and relevant cross-currency dynamics.
—
### US Dollar: Reasserting Its Safe-Haven Status
The US dollar has been regaining traction, building on gains driven by positive economic indicators and expectations that the Federal Reserve will keep rates higher for longer. Several factors contribute to the greenback’s current strength:
#### Key Drivers of USD Strength
– **Upbeat US Economic Data**: Recent releases of robust economic indicators, such as the ISM manufacturing services PMIs, have provided evidence of persistent resilience in the US economy.
– **Federal Reserve Policy**: While the Federal Reserve left its policy rate unchanged during the last meeting, Chair Jerome Powell emphasized data dependence, refraining from signaling any imminent rate cut.
– **Labor Market Resilience**: Investors are keenly watching this week’s labor market data, with the ADP employment report as a prelude to the crucial Non-Farm Payrolls (NFP) on Friday. The expectation is for continued solid job creation.
– **Geopolitical Uncertainty**: Global uncertainties, including geopolitical tensions and fragmented supply chains, support demand for the US dollar as a safe-haven asset.
#### US Dollar Index (DXY) Performance
– The DXY touched its highest level in over a month, trading near the 105.40 mark mid-week.
– Previous resistance levels are being cleared, signaling a bullish technical outlook.
#### Broader Implications
Should the ADP and NFP reports maintain their positive momentum, traders are likely to extend USD long positions, anticipating a hawkish Fed and robust economic growth. Market consensus around the Fed delayed pivot also underpins dollar demand.
—
### AUD/USD: Testing Key Technical Support
The Australian dollar has slid lower against the USD throughout the week, with AUD/USD now at risk of breaching significant support near the 0.6420 level. Several domestic and global drivers frame the currency pair’s outlook.
#### Factors Influencing AUD/USD Weakness
– **Divergence in Central Bank Policy**: After the Reserve Bank of Australia (RBA) held rates steady, it signaled a cautious approach to further hikes. This contrasts with the Federal Reserve’s higher-for-longer stance.
– **Softening Chinese Data**: China, Australia’s key trading partner, reported underwhelming PMI figures for the services sector, hinting at subdued trade and export demand for Australia.
– **
Read more on AUD/USD trading.