The Australian Dollar (AUD) sure showed some grit in early Wednesday’s Asian trading. Despite some disappointing news out of Australia – its first-quarter GDP only limped in at 0.2% quarter-on-quarter, half of what was expected – the AUD/USD pair somehow managed to hold steady above the 0.6450 mark. It’s a curious resilience, but any big leaps higher seem to be capped. Why? Well, the Reserve Bank of Australia (RBA) is sounding a bit dovish, and those old fears about the US-China trade war are bubbling up again. Everyone’s now glued to upcoming US jobs figures and any fresh updates on global trade.
Latest Australian Dollar News
It’s been a busy few days for the Aussie. Just yesterday, the AUD/JPY Price Forecast nudged higher, with eyes on the 94.00 level, as a bullish harami popped up. Meanwhile, AUD/USD seemed to retreat from psychological resistance, largely because the Fed continues to grab the spotlight. Generally, the AUD/USD has been drifting a bit lower, caught between a cautious RBA and all that global trade uncertainty.
AUD/USD Technical Overview
When we look at the charts, the AUD/USD is currently sitting at 0.6469.
Should the AUD/USD surpass its 2025 peak of 0.6537 (from May 26), it may just set its sights on the November 2024 high of 0.6687. Beyond that, the big target would be the 2024 peak at 0.6942.
On the flip side, first support is around 0.6356 (its May 12 low), a region nicely underpinned by the interim 55-day SMA. If that gives way, the next stop could be the transitory 100-day SMA at 0.6326, before hitting the psychological support at 0.6000. A deeper fall could even bring the 2025 bottom at 0.5913 (from April 9) back into play.
As for momentum, the indicators offer a mixed but generally positive view. The Average Directional Index (ADX) hovers around 22, hinting at trend persistence but perhaps with little conviction. The Relative Strength Index (RSI) has eased a bit to around 54, which, in the short term, still suggests a positive scenario.
Fundamental Overview
The Australian Dollar (AUD) really felt the squeeze from a strong rebound in the US Dollar (USD) yesterday. The AUD/USD pair found itself under pressure, eroding some of the ground it had promisingly gained on Monday. That said, the AUD briefly managed to test the 0.6500 zone before retreating to the mid-0.6000s, which coincides with its key 200-day SMA.
Central banks in focus
The world of foreign exchange continues to hang on every word from central banks, searching for clues on where currencies might head next. The Federal Reserve (Fed), for its part, kept rates unchanged during its May meeting, and Chair Jerome Powell struck a wary, data-dependent posture. Since softer April inflation estimates have then caused markets to price in a probable rate decrease by September more and more.
Meanwhile, the Reserve Bank of Australia (RBA) took a decidedly more dovish turn on May 20, lowering its benchmark rate by 25 basis points to 3.85%. They even projected the cash rate to drop to 3.2% by 2027, hinting at a slow, gradual easing cycle. With inflation now expected to ease to 2.6%, the bank pointed to lingering uncertainty around local demand and global supply chains, even trimming its 2025 GDP growth estimate to 2.1%. Just yesterday, the RBA Minutes noted that the decision to lower the OCR was aimed at maintaining monetary policy predictability amidst increased uncertainty. They even said a bigger decrease of 50 basis points would be needed if household spending didn’t pick up or if wage growth slowed more than expected, together with a weak job market. They also acknowledged that unexpected global policy uncertainty might, at times, demand a more forceful response. Futures markets are already leaning heavily into this, indicating nearly 80% odds of a quarter-point rate cut at the July gathering, with expectations of nearly 100 basis points of easing over the next 12 months.
China’s mixed signals weigh on outlook
For Australia, whose biggest trade partner is China, the most recent GDP figures from Beijing painted a somewhat murky picture. Although Q1 industrial production shocked everyone with an increase, sluggish retail sales and little investment highlighted ongoing fragilities. The People’s Bank of China (PBoC) reacted by cutting its 1- and 5-year Loan Prime Rates by 10 basis points. Still, the broader regional economic view remains clouded by structural issues like an unpredictable property market and the erratic dance of US-China trade dynamics. Even early positive results from the Caixin Manufacturing PMI in May failed to reignite optimism or solid hopes for a swift economic recovery.
Speculators turn bearish again
It seems the Aussie is losing favor with speculators. Even with open interest seeing a rise, recent CFTC data from May 27 showed net short positions climbing to 61.2K contracts – the largest number since early April. This reflects a cautious posture across broader markets.
Looking ahead
What’s next on the Australian economic calendar? Today brings the Q1 GDP Growth Rate, final S&P Global Services PMI, and the Ai Group survey (June 4). Then, Trade Balance numbers are due tomorrow, June 5, and the week wraps up with Private House Approvals and Building Permits on June 6. All eyes will be on these figures for further clues on the AUD’s direction.
