Australian Dollar drifts higher above 0.7200 despite as strong US NFP

The AUD/USD pair gathers strength to around 0.7205 during the early Asian session on Monday. The Australian Dollar (AUD) edges higher against the US Dollar (USD) as China seeks to shore up capital across its financial system. US markets will be closed on Monday for Labor Day.

China's Finance Ministry will lead a combined $54 billion capital injection into state-owned insurers and banks as Beijing moves to shore up balance sheets and sustain growth in a slowing economy, per Bloomberg.

The source said at least eight financial institutions are seeking $53.6 billion in fresh capital, with the government providing more than 80% of the funding. This development provides some support to the China-proxy Aussie, as China is a major trading partner of Australia.

On the other hand, the upbeat US employment report might help limit the Greenbacks losses. Data released by the US Bureau of Labor Statistics (BLS) on Friday showed that Nonfarm Payrolls (NFP) increased by 162,000 in August after an upwardly revised rise of 21,000 in July. This figure came in above the market consensus of 56,000 and registered the largest gain in five months.

Meanwhile, the Unemployment Rate in the US held steady at 4.1%, suggesting an improvement in the labor market after recent struggles, keeping an interest rate increase from the Federal Reserve (Fed) this month on the table.

Financial markets are now pricing in nearly a 58.3% chance of a 25 basis points (bps) rate hike at the Fed's September meeting, up from about 50.2% before the data, according to the CME FedWatch tool.

Societe Generale frames the near-term focus squarely on upcoming domestic data, asking whether it will be sufficient to shift the policy timeline at Martin Place. With AUD/USD holding firm after recent dip-buying and market expectations coalescing around a modest tightening later this month, the bank pointedly raises the question: “Will the data convince the RBA to bring forward the next rate increase?”

In the daily chart, AUD/USD maintains a bullish near-term bias as spot holds above the Bollinger middle band and the 100-day simple moving average (SMA), keeping the broader uptrend supported. Price is approaching the upper Bollinger band, while the Relative Strength Index (RSI) at 66.99 is edging into bullish territory but still shy of classical overbought readings, suggesting upside momentum is firm yet not extreme.

On the topside, immediate resistance is located at the upper Bollinger band at 0.7235, where a daily close above would open the way for a continuation of the advance. On the downside, initial support emerges at the Bollinger middle band at 0.7140, followed by the 100-day SMA at 0.7080 and the lower Bollinger band near 0.7045, levels that together define a layered demand zone underpinning the bullish structure as long as they remain intact.