The Australian Dollar (AUD) slipped slightly against the US Dollar (USD) on Tuesday but managed to hold above 0.6500, buoyed by optimism over potential easing in US-China trade tensions and resilience in key Chinese economic data. The AUD/USD pair traded around 0.6520 during the European session, maintaining a bullish posture despite mixed domestic and global signals.
Hopes for a de-escalation in tariff tensions between the United States and China lent support to the Aussie. US and Chinese officials are set to continue trade discussions in London on Tuesday, focusing on critical sectors like technology and rare earth shipments, according to Bloomberg. Any progress in talks could favor the AUD, given Australia’s strong trade ties with China.
Meanwhile, Australia’s economic indicators presented a mixed picture. Westpac Consumer Confidence rose 0.5% in June, a significant drop from May’s 2.2% gain, reflecting global trade uncertainties. Nonetheless, it marked the fourth monthly increase this year, supported by the Reserve Bank of Australia’s May rate cut and signs of moderating inflation.
In the United States, the Dollar strengthened on the back of solid macroeconomic data and cautious central bank commentary. The US Dollar Index (DXY) hovered around 99.10 as investors await May’s Consumer Price Index (CPI) data, expected to show a 2.5% year-over-year increase.
Nonfarm Payrolls (NFP) in May rose by 139,000, exceeding market expectations of 130,000, though down from April’s revised figure of 147,000. The Unemployment Rate remained steady at 4.2%, and Average Hourly Earnings held firm at 3.9%, both surpassing forecasts.
Political developments also weighed on sentiment. Former President Donald Trump renewed pressure on the Federal Reserve, urging Chair Jerome Powell to lower interest rates. Simultaneously, House Republicans passed Trump’s sweeping tax and spending bill, sparking concerns over rising deficits and persistently high bond yields. The “Sell America” trend gained traction amid fears of economic overheating.
In China, deflationary concerns lingered as the National Bureau of Statistics reported a 0.1% annual drop in CPI for May, matching April’s decline but beating forecasts of a 0.2% drop. Monthly CPI also fell by 0.2%, while the Producer Price Index (PPI) slid by 3.3% year-on-year. Trade data showed China’s surplus widening to CNY743.56 billion in May, with exports growing 6.3% annually and imports declining 2.1%.
Australia’s own trade surplus narrowed to AUD 5.41 billion in April, below expectations of AUD 6.1 billion. Exports fell 2.4% month-on-month, while imports rose 1.1%. Despite weaker trade figures, investor confidence in AUD remains supported by China’s economic stability and easing US-China tensions.
Technical Outlook:
The AUD/USD pair remains within a bullish ascending channel, supported by its position above the nine-day Exponential Moving Average (EMA) at 0.6489. The 14-day Relative Strength Index (RSI) continues to signal upside momentum, staying above the 50 level.
Immediate resistance lies at 0.6538 — a seven-month high marked on June 5. A sustained break above this level could open the path to the eight-month high near 0.6687, aligned with the upper boundary of the ascending channel.
Key support rests at 0.6480, the lower bound of the current channel and close to the nine-day EMA. A decisive drop below this level may challenge the 50-day EMA at 0.6412 and weaken the bullish narrative.
