The Australian Dollar (AUD) lost momentum against the US Dollar (USD) on Wednesday, erasing earlier gains despite remaining in positive territory. The decline followed the release of mixed domestic economic data and growing global trade uncertainty, which continues to influence investor sentiment.
Data from the Australian Bureau of Statistics revealed that Gross Domestic Product (GDP) grew by just 0.2% quarter-on-quarter in Q1, falling short of market expectations of a 0.4% increase and down from 0.6% in the previous quarter. Year-on-year GDP growth held steady at 1.3%, below the anticipated 1.5%, signaling a slowing economic pace.
Additional figures painted a similarly subdued picture. The S&P Global Australia Composite PMI edged down to 50.5 in May from 51.0 in April, indicating marginal growth in business activity—its slowest pace so far in 2025. The Services PMI also eased to 50.6, continuing a 16-month streak of expansion but at the weakest rate in six months. Meanwhile, the Ai Group Manufacturing PMI improved slightly to -23.5 from -26.5, though still deeply in contraction territory, as manufacturers face project delays and rising caution amid global and domestic uncertainties.
Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter voiced concern over the broader trade landscape, warning that escalating US tariffs could weigh on global growth. However, she also noted that Australian exporters are comparatively well-positioned and that potential Chinese fiscal stimulus may help cushion the impact.
Despite a minor rebound in the AUD/USD pair during early trading, broader pressure from a recovering US Dollar reversed gains. The US Dollar Index (DXY) hovered around 99.10, as investors digested mixed signals from recent US data and braced for upcoming economic releases.
The latest US Job Openings and Labor Turnover Survey (JOLTS) showed that job openings rose to 7.39 million in April, exceeding expectations and March’s 7.2 million. However, the ISM Manufacturing PMI dipped to 48.5 in May, missing the forecast of 49.5, reinforcing concerns about a slowing industrial sector.
Trade tensions flared once again as former US President Donald Trump, speaking at a Pennsylvania rally, pledged to double tariffs on steel and aluminum imports. He proposed raising steel tariffs from 25% to 50%, aiming to intensify pressure on global producers. Although a Manhattan court initially blocked the move, a higher federal court in Washington has since allowed the tariffs to proceed temporarily.
In parallel, the House of Representatives passed Trump’s sweeping “Big Beautiful Bill”—a multitrillion-dollar tax and spending package. The bill is expected to raise the US fiscal deficit, potentially keeping bond yields elevated and stoking market fears. Senate revisions are anticipated ahead of a July 4 target date for finalization.
Tensions with China also resurfaced after Trump accused Beijing of violating a temporary tariff truce agreed upon in Geneva. US officials said China had failed to eliminate certain non-tariff barriers. China’s Ministry of Commerce responded, insisting it had met its obligations by suspending relevant tariff measures.
Adding to the uncertainty, China’s Caixin Manufacturing PMI unexpectedly fell to 48.3 in May, down from 50.4, and well below the expected 50.6. While official NBS data showed a slight improvement in manufacturing at 49.5, the non-manufacturing PMI declined to 50.3. Given Australia’s trade ties with China, weak Chinese data could spill over into the Australian economy.
Minutes from the RBA’s May policy meeting revealed a cautious stance. Policymakers leaned toward a 25 basis point rate cut, citing persistent risks from global trade conflicts, though they stopped short of advocating a 50 bps reduction. Governor Michele Bullock confirmed the RBA is ready to act further if conditions worsen, signaling a dovish outlook amid fragile global dynamics.
Technical Outlook: AUD/USD Holds Support but Faces Key Resistance
AUD/USD was last seen trading around 0.6470, maintaining a bullish tone within an ascending channel on the daily chart. The pair remains above the nine-day Exponential Moving Average (EMA), with the 14-day Relative Strength Index (RSI) above 50—indicating sustained upward momentum.
Immediate resistance is located at 0.6537, the seven-month high marked on May 26. A break above this level could propel the pair toward the channel’s upper boundary near 0.6670.
On the downside, initial support lies at the nine-day EMA of 0.6456, in line with the lower boundary of the ascending channel at 0.6450. A decisive move below this zone could invalidate the bullish setup and lead to a test of the 50-day EMA at 0.6395.
Related Topics:
