The Australian Dollar (AUD) weakened against the US Dollar (USD) on Tuesday, erasing much of the roughly 1% gain it posted in the previous session. The AUD/USD pair remained subdued following the release of the Reserve Bank of Australia’s (RBA) May meeting minutes, which emphasized a cautious and predictable approach to monetary policy.
The minutes revealed that the RBA board favored a 25 basis point rate cut, rather than a larger 50 basis points reduction, despite acknowledging the significant adverse impact of US trade policies on the global economic outlook. While these trade tensions had yet to affect Australia’s economy directly, the board remains vigilant.
RBA Assistant Governor Sarah Hunter cautioned that rising US tariffs could dampen global growth and raise uncertainty, potentially hurting investment, output, and employment in Australia. However, she expressed confidence in Australian exporters’ resilience and anticipated Chinese fiscal stimulus to support its economy amid the turbulence.
Chinese economic data added to market uncertainty. The Caixin Manufacturing PMI unexpectedly dropped to 48.3 in May from 50.4 in April, missing expectations of a 50.6 expansion. Contrarily, the National Bureau of Statistics’ Manufacturing PMI edged up to 49.5, though the Non-Manufacturing PMI declined to 50.3, both falling short of forecasts. Given China’s close trade ties with Australia, these mixed signals weigh on the Aussie Dollar.
Despite these headwinds, the AUD/USD pair could regain strength if the US Dollar continues to falter amid mounting concerns about sluggish US growth and inflationary pressures. US President Donald Trump’s threat to double tariffs on steel and aluminum imports—from 25% to 50% effective Wednesday—has intensified fears around trade disputes.
The US Dollar Index (DXY), which tracks the Greenback against six major currencies, climbed near 98.80 amid cautious investor sentiment. Market participants are awaiting the JOLTS Job Openings report later Tuesday. Recent US data showed the Manufacturing PMI slipping to 48.5 in May from 48.7, underperforming expectations of 49.5.
Trump’s aggressive trade stance remains a key focus. At a Pennsylvania rally, he vowed to raise steel and aluminum tariffs further to protect US industries, according to Reuters. Legal battles ensued over these tariffs, with mixed rulings from federal courts. Meanwhile, House Republicans approved a massive tax and spending bill, raising concerns over the US fiscal deficit and the potential for prolonged higher bond yields. Senate deliberations are ongoing, with a target to finalize by July 4.
Trump also accused China of violating a recent tariff truce, while Chinese officials defended their compliance by suspending reciprocal trade barriers. These escalating tensions add volatility to global markets.
Domestically, Australian labor market data showed a 1.2% drop in job advertisements in May—the second consecutive monthly decline—while S&P Global’s Manufacturing PMI fell to 51.0, its lowest since February, signaling a slowdown in factory activity.
The RBA signaled readiness for further rate cuts amid signs of easing inflation but underscored the risks posed by US-China trade frictions. Governor Michele Bullock affirmed the central bank’s willingness to act if economic conditions worsen, raising expectations for additional monetary easing.
Technically, AUD/USD traded near 0.6468 on Tuesday, maintaining a bullish tone within an ascending channel pattern. The pair stayed above the nine-day Exponential Moving Average (EMA) around 0.6456, with the 14-day Relative Strength Index (RSI) above 50, indicating upward momentum.
Immediate resistance is seen at 0.6537, a seven-month high from May 26. A sustained breakout above this level could extend gains toward the upper boundary of the channel near 0.6660. On the downside, support holds at the nine-day EMA and the channel’s lower boundary near 0.6450. A break below this support could weaken the bullish outlook and push the pair toward the 50-day EMA at 0.6393.
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