Australian Dollar softens as RBA cut bets and trade tensions weigh, US NFP looms

• Aussie dips near 0.6280 amid trade gloom.
• RBA likely to cut rates to 4.1%, capping Aussie gains.
• Markets await US labor data for fresh momentum.
• Soft Trade Balance data from Australia also affected the Aussie.

The Australian Dollar (AUD) softens to around 0.6280 in Thursday's American session, tallying nearly 0.30% losses. Expectations of a Reserve Bank of Australia (RBA) rate cut and revived United States (US)-China tariff anxieties hamper the pair's upside. Meanwhile, attention shifts to the United States labor market report on Friday, with the Aussie bracing for further volatility.

Daily digest market movers: Aussie edges lower as US Dollar recovers

• On the local front, Australia's trade surplus shrank to 5,085M in December from 6,792M, below expectations of 7,000M, as exports rose just 1.1% while imports surged 5.9%.
• Markets now price a 95% chance of an RBA rate cut from 4.35% to 4.10%, undermining the Aussie's resilience.
• US President Donald Trump floats the idea of higher tariffs on the Eurozone and China, pressuring the China-linked Australian Dollar.
• The US Dollar finds support from hawkish Federal Reserve expectations, although weaker labor data could curb USD demand.
• Investors are now focusing on Friday's Nonfarm Payrolls report, projected to show 170,000 new jobs in January, down from December's 256,000.
• Jobless Claims raised concerns as Initial claims rose to 219,000, surpassing expectations of 213,000 and up from last week's 208,000, signaling potential labor market softening.
• Continuing jobless claims increase to 1.886 million, above the forecast of 1.87 million.

AUD/USD technical outlook: Mild retracement stalls near 20-day SMA

The pair declined to 0.6280 on Thursday, after surging past the 20-day Simple Moving Average at approximately 0.6230. The Relative Strength Index (RSI) stands at 55, still in positive territory but declining. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram shows decreasing green bars, hinting at waning bullish momentum.

Although the Aussie's near-term support may hold above 0.6200, dovish RBA expectations and renewed tariff worries could keep any further advances below the 0.6300 resistance in check. A hold of the 20-day SMA would reject any bearish threats, at least for the short term.