The Australian Dollar (AUD) extended its downward slide against the US Dollar (USD) for the third consecutive session on Friday, with AUD/USD hovering around 0.6410. The pair continues to face pressure despite a strong domestic labor market and improving global risk appetite.
The latest selling pressure on the Aussie appears linked to fresh geopolitical concerns, as reports emerged that the Trump administration plans to place several Chinese semiconductor firms on its export blacklist—the so-called “entity list.” The move has reignited concerns about US-China tensions, which tend to weigh heavily on the AUD due to Australia’s close economic ties with China.
The Financial Times reported that senior US officials worry the timing of the sanctions could undermine the tentative trade truce recently reached with China in Geneva. Under the agreement, the US is expected to reduce tariffs on Chinese imports from 145% to 30%, while China would cut tariffs on US goods from 125% to 10%.
Adding to broader geopolitical optimism, Iranian officials signaled readiness to sign a new nuclear agreement with the US, while President Donald Trump expressed openness to direct talks with Chinese President Xi Jinping, calling bilateral relations “excellent.”
However, the Aussie’s failure to capitalize on these positive developments underscores deeper investor caution, even as Australia’s economic indicators show strength. According to the Australian Bureau of Statistics, employment surged by 89,000 jobs in April—more than four times the expected increase. The unemployment rate held steady at 4.1%, and wage growth picked up to 3.4% year-over-year in Q1 2025, beating forecasts and marking a rebound from the previous quarter.
Despite this, markets remain focused on the Reserve Bank of Australia’s (RBA) policy path. While recent economic resilience has led investors to dial back expectations for aggressive rate cuts, the RBA is still widely anticipated to lower the cash rate by 25 basis points at its upcoming meeting. Markets now project the rate to settle near 3.1% by year-end, compared to earlier forecasts of 2.85%.
Political stability also lent some support, with Prime Minister Anthony Albanese securing a second term after a decisive election win. His cabinet remains largely unchanged, and he is scheduled to attend the inauguration of Pope Leo XIV in Rome on Sunday, where trade talks with European leaders are expected.
In contrast, the US Dollar has weakened slightly amid growing speculation that the Federal Reserve will resume rate cuts. The Producer Price Index (PPI) declined 0.5% in April, with annual headline inflation easing to 2.4%. Core PPI rose 3.1% annually, down from 4%. Consumer inflation also softened, with the April Consumer Price Index (CPI) rising just 2.3% year-over-year. Meanwhile, retail sales data showed a modest 0.1% increase, reinforcing expectations of slowing economic momentum.
Technical Outlook: AUD/USD Faces Pressure Below Key Averages
From a technical perspective, AUD/USD is trading below its nine-day Exponential Moving Average (EMA), signaling ongoing bearish pressure. However, the 14-day Relative Strength Index (RSI) remains above 50, suggesting the potential for a limited rebound.
Immediate support is seen at the 0.6400 psychological level, followed by stronger support at the 50-day EMA around 0.6355. A break below these zones could expose the pair to further losses toward 0.5914, a level last tested in March 2020.
On the upside, initial resistance lies at 0.6417 (nine-day EMA), with further hurdles at 0.6515—the six-month high from December 2024—and the seven-month peak of 0.6687 reached in November. A sustained move above these levels would be needed to shift momentum back in favor of the bulls.
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