The Australian Dollar (AUD) edged higher against the US Dollar (USD) on Monday, reversing losses from the previous session. The AUD/USD pair traded around 0.6510, supported by favorable Chinese economic data and broader US market uncertainty.
Australia’s close trade ties with China meant that fresh Chinese macroeconomic indicators had an immediate impact on the Aussie. China’s National Bureau of Statistics reported that Consumer Price Index (CPI) inflation declined 0.1% year-over-year in May, outperforming expectations of a 0.2% drop. On a monthly basis, CPI fell 0.2%, reversing April’s 0.1% increase. Meanwhile, China’s Producer Price Index (PPI) saw a sharper annual decline of 3.3% in May, extending April’s 2.7% fall.
China’s trade balance also posted a larger-than-expected surplus in May, reaching CNY743.56 billion, up from CNY689.99 billion previously. However, export growth slowed to 6.3% year-over-year from 9.3%, while imports dropped 2.1%, a reversal from the previous 0.8% rise.
Market sentiment was also influenced by renewed US-China trade negotiations, after US President Donald Trump and Chinese President Xi Jinping agreed on Thursday to resume talks. A delegation led by US Treasury Secretary Scott Bessent is scheduled to meet Chinese officials in London on Monday to begin discussions aimed at ending the ongoing trade conflict.
Adding to market caution, Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter warned that rising US tariffs could weigh on the global economy and potentially weaken investment, output, and employment in Australia.
Weaker US Dollar Amid Domestic Pressures
The US Dollar Index (DXY) slipped to around 99.00 despite being bolstered by stronger-than-expected US employment data. The Bureau of Labor Statistics reported that Nonfarm Payrolls rose by 139,000 in May—above the 130,000 forecast, though lower than April’s revised figure of 147,000. The Unemployment Rate held steady at 4.2%, and Average Hourly Earnings remained unchanged at 3.9%.
Despite the solid jobs report, political and fiscal developments weighed on the greenback. Former President Donald Trump publicly called on Federal Reserve Chair Jerome Powell to lower interest rates, criticizing the Fed’s policy stance on Truth Social. “ADP NUMBER OUT!!! ‘Too Late’ Powell must now LOWER THE RATE… Europe has lowered NINE TIMES,” he posted.
Meanwhile, Minneapolis Fed President Neel Kashkari noted early signs of a softening labor market, reinforcing the Fed’s cautious, wait-and-see approach amid persistent economic uncertainty.
In fiscal news, House Republicans passed Trump’s “Big Beautiful Bill,” a massive tax and spending package expected to widen the US fiscal deficit. The bill’s trajectory through the Senate will be closely watched, as it may fuel concerns about elevated bond yields and economic overheating—contributing to the growing “Sell America” sentiment among global investors.
Australian Fundamentals Mixed but Supportive
Australia’s domestic data presented a mixed picture. The country recorded a trade surplus of AUD 5.413 billion in April, falling short of expectations. Exports declined by 2.4% month-over-month, while imports rose by 1.1%.
Gross Domestic Product (GDP) for Q1 showed 0.2% quarter-over-quarter growth, below the expected 0.4% and down from the previous 0.6%. Annual GDP growth stood at 1.3%, missing forecasts of 1.5%. However, China’s Caixin Services PMI rose to 51.1 in May, offering a positive signal for Australian exporters.
Technical Outlook: Bullish Bias Intact
Technically, the AUD/USD pair remains within an ascending channel on the daily chart, supported by the nine-day Exponential Moving Average (EMA) at 0.6481. The 14-day Relative Strength Index (RSI) remains above 50, indicating continued bullish momentum.
Immediate resistance is seen at the June 5 high of 0.6538. A decisive break above this level could open the door to 0.6680, near the eight-month high of 0.6687.
On the downside, key support lies at the ascending channel’s lower boundary and the nine-day EMA near 0.6480. A break below this level could shift momentum bearish, exposing the 50-day EMA at 0.6408.
With Chinese data improving and geopolitical risks pressuring the US Dollar, the Australian Dollar appears well-positioned for further gains—provided near-term resistance levels are cleared.
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