AUD/USD steadies above 0.6500 as focus shifts to US Nonfarm Payrolls

• AUD/USD slips nearly 0.5% but holds above the 0.6500 psychological level.
• Australia's July trade surplus widened to A$7.31B as exports rose and imports fell.
• Markets expect NFP to show 75K jobs in August, with Unemployment Rate edging up to 4.3%.

The Australian Dollar (AUD) is under pressure against the US Dollar (USD) on Thursday, with AUD/USD down almost 0.50%, trading near 0.6510 at the time of writing. The pullback reflects broad Greenback resilience as markets digest a mixed batch of US labor data and stronger services activity, though the pair is holding firm above the 0.6500 psychological level.

The US Dollar is regaining ground, with the DXY index hovering near 98.40, underpinned by cautious positioning ahead of Friday's Nonfarm Payrolls (NFP). Labor signals this week have pointed to softer hiring and rising layoffs, while the ISM survey showed services demand holding steady despite weakening employment. These dynamics reinforce expectations for a Fed rate cut later this month, though uncertainty remains over the pace and size of easing.

Australia's external sector offered mixed signals earlier on Thursday. July trade data showed the surplus widening to A$7.31 billion, compared with A$5.37 billion in June and beating expectations of A$4.92 billion. Exports rose 3.3% on the month, supported by stronger commodity shipments, while imports fell 1.3%, reflecting softer domestic demand. While the wider surplus underlines Australia's reliance on external trade, it did little to shift sentiment around the Aussie.

Looking ahead, all eyes are on Friday's US NFP report. Markets expect job growth to slow to 75K in August from 73K previously, with the Unemployment Rate seen edging up to 4.3% from 4.2%. Average Hourly Earnings are forecast to rise 0.3% MoM and 3.7% YoY, slightly softer than July's 3.9% pace. A weaker print would likely weigh on the USD by reinforcing the case for Fed easing, while a stronger outcome could keep the Greenback supported in the short term. Still, with a 25 basis point cut at the September Fed meeting already almost fully priced in, that should cap the upside for the US Dollar.