The Australian Dollar (AUD) edged lower against the US Dollar (USD) on Wednesday, retreating from recent highs despite a thaw in US-China trade tensions that could support the AUD in the near term. At the time of writing, the AUD/USD pair was trading near 0.6510, testing the 0.6500 support level.
The Australian currency‘s retreat follows cautious optimism surrounding US-China trade relations. US Commerce Secretary Howard Lutnick stated that both nations have established a framework to implement the Geneva Consensus and are now awaiting approval from US President Donald Trump, according to Bloomberg. Chinese Vice Commerce Minister Li Chenggang echoed similar sentiment, describing talks as “rational and candid,” and noted he would report the framework to Beijing’s leadership.
Hopes for a resolution also extended to critical trade issues, including shipments of rare earth minerals and magnets, which US negotiators said are expected to be addressed under the new framework.
Meanwhile, the US Dollar extended its strength, underpinned by gains in the US Dollar Index (DXY), which was trading around 99.10—marking its second consecutive day of upward momentum. Attention now turns to the upcoming US Consumer Price Index (CPI) report, with expectations for a 2.5% year-over-year rise in May.
On the legal front, a US federal appeals court ruled to keep broad tariffs imposed under President Trump in place while the government continues its challenge against a lower court ruling. Additionally, labor market data from the Bureau of Labor Statistics showed US Nonfarm Payrolls rose by 139,000 in May—beating the 130,000 consensus forecast—while the Unemployment Rate held steady at 4.2%, and Average Hourly Earnings remained at 3.9%.
Amid these developments, President Trump renewed calls for Federal Reserve Chair Jerome Powell to cut interest rates, citing slowing employment growth and contrasting the Fed’s stance with the European Central Bank’s rate-cutting trend.
China’s latest economic data revealed mixed signals. The country’s Consumer Price Index (CPI) fell 0.1% year-over-year in May, matching April’s decline, while monthly CPI dropped 0.2%. Producer Price Index (PPI) inflation deteriorated further, with a 3.3% annual drop. Trade data showed a widening surplus to CNY743.56 billion in May, driven by a 6.3% rise in exports and a 2.1% decline in imports.
Australia’s own trade data painted a cautious picture, with the April trade surplus narrowing to AUD 5.41 billion, well below expectations. Exports dropped by 2.4% month-over-month, while imports rose 1.1%. However, China’s Caixin Services PMI improved slightly to 51.1 in May, suggesting some resilience in the services sector.
Technical Outlook
Despite the AUD’s decline, the AUD/USD pair maintains a bullish structure. It continues to trade within an ascending channel and above the nine-day Exponential Moving Average (EMA), indicating firm short-term momentum. The 14-day Relative Strength Index (RSI) remains above 50, further reinforcing the positive outlook.
Immediate resistance is seen at 0.6538, the seven-month high touched on June 5. A break above this level could pave the way toward the eight-month high of 0.6687, with further gains capped near the channel’s upper boundary at 0.6710.
To the downside, initial support lies at the nine-day EMA of 0.6492, closely aligned with the lower boundary of the ascending channel near 0.6480. A decisive move below this zone could weaken the bullish setup, with the next key support seen at the 50-day EMA around 0.6416.
Market participants will closely monitor US inflation data and further trade-related developments for near-term cues on AUD/USD direction.
