The Australian Dollar (AUD) extended its decline against the US Dollar (USD) on Monday, marking its second consecutive session in the red. Market sentiment remains fragile, driven by intensifying geopolitical tensions in the Middle East and mixed signals from key Chinese economic indicators.
Despite a stronger-than-expected rise in China’s May Retail Sales—up 6.4% year-over-year, surpassing forecasts of 5.0%—the Australian Dollar struggled to find support. Australia’s deep trade ties with China often make its currency sensitive to Chinese data. However, Industrial Production from China came in below expectations, rising 5.8% versus a projected 5.9% and April’s 6.1%, dampening optimism.
Meanwhile, ongoing hostilities between Israel and Iran continue to fuel risk aversion in global markets. According to CNN, Iran launched multiple waves of ballistic missile attacks targeting Israeli military-industrial sites and fuel facilities. In response, Israel intensified its counterstrikes, despite international appeals for restraint and diplomacy.
Casualty reports paint a grim picture: at least 224 deaths have been confirmed in Iran, alongside 14 in Israel. Iran’s Ministry of Health reported over 1,270 injuries since Israel began its assault on Friday. Iran has reportedly told mediators in Qatar and Oman that it will not engage in negotiations while under attack, contradicting some reports that it had sought US mediation for a ceasefire or to restart nuclear talks.
In parallel, the US Dollar continues to strengthen amid safe-haven demand. The US Dollar Index (DXY) has recovered recent losses, climbing to approximately 98.10. Investors are also closely watching US economic indicators, with Friday’s University of Michigan Consumer Sentiment Index jumping to 60.5 in June from 52.2—well above the 53.5 forecast.
US inflation data provided mixed signals. The May Producer Price Index (PPI) edged up 0.1% month-over-month, following a revised decline of 0.2% in April. The core PPI, excluding food and energy, also rose 0.1%, missing expectations of a 0.3% gain.
The Federal Reserve is widely expected to maintain its policy rate in the 4.25%–4.50% range during Wednesday’s meeting. Market pricing suggests an increasing probability of a 25 basis point rate cut by September.
On the trade front, Reuters reported last week that former President Donald Trump expanded tariffs on imported steel derivative products, including household appliances, effective June 23. Initially imposed at 25% in March and later doubled to 50%, the scope now includes more consumer goods. Trump also claimed via Truth Social that a new trade deal with China is in place, pending final approval from both himself and Chinese President Xi Jinping.
In a countermeasure, China will reportedly issue only six-month rare-earth export licenses for US automakers and manufacturers, signaling an intent to wield strategic control over critical mineral exports in future trade negotiations.
Technical Outlook:
The AUD/USD pair is trading near 0.6480, remaining below key resistance at the nine-day Exponential Moving Average (EMA) of 0.6495. Despite a broader bullish trend within the ascending channel, the pair’s position beneath the short-term EMA highlights weakening momentum.
The next upside target stands at 0.6538, the seven-month high recorded on June 5. A break above this could open the path toward 0.6687, the eight-month high, and eventually to the upper boundary of the channel around 0.6730.
On the downside, immediate support lies near the ascending channel’s lower boundary at 0.6470. A decisive breach of this level would undermine the current bullish bias, with further support expected at the 50-day EMA of 0.6425.
