The Australian Dollar (AUD) came under renewed pressure on Friday, reversing recent gains against the US Dollar (USD), as markets braced for an expected interest rate cut by the Reserve Bank of Australia (RBA) next week. The AUD/USD pair slipped below 0.6520, marking a cautious end to the week.
Rate Cut Speculation Pressures Aussie Dollar
Investor sentiment has shifted decisively in favor of a 25 basis point cut by the RBA, with over 92% of market participants now anticipating the move. If delivered, this would bring Australia’s benchmark cash rate down to 3.60%. The dovish outlook follows softer core inflation data, which slowed to 2.7% in June — within the RBA’s target range of 2–3% — along with signs of rising unemployment and cooling wage growth.
Despite the easing inflationary pressures, Australia’s trade performance remained strong. The trade surplus surged to AUD 5.36 billion in June, beating market expectations, as monthly exports rose by 6%. This suggests underlying economic momentum, though not enough to offset expectations of monetary easing.
US Dollar Recovers as Tariffs, Fed Speculation Stir Volatility
Meanwhile, the US Dollar has regained ground, supported by rising rate cut bets and renewed trade tensions. The US Dollar Index (DXY) hovered near 98.10, rebounding from previous losses. Political and monetary developments are also contributing to the USD’s strength.
US President Donald Trump nominated Stephen Miran to replace Adriana Kugler on the Federal Reserve Board, while also signaling potential leadership changes at the Fed, with Christopher Waller reportedly a contender for the Chair role.
Markets have nearly priced in a 25 basis point rate cut by the Federal Reserve in September, up from 48% a week earlier, following weaker-than-expected labor data. US initial jobless claims rose to 226,000, the highest in a month, reinforcing concerns of a cooling job market.
Adding to the volatility, Trump announced new tariffs — including up to 250% on pharmaceuticals and 100% on semiconductors — raising concerns about economic fallout both domestically and abroad. However, Australia appears to have been spared in the latest tariff hikes, keeping its baseline rate at 10%.
AUD/USD Technical Outlook: Eyes on 0.6500 and 0.6600 Levels
From a technical standpoint, AUD/USD is hovering near 0.6510, slightly above its 9-day Exponential Moving Average (EMA) at 0.6501 and the 50-day EMA at 0.6498. The 14-day Relative Strength Index (RSI) is above 50, indicating modest bullish momentum.
Key Resistance Levels:
- 0.6600 (psychological)
- 0.6625 (July high)
Key Support Levels:
- 0.6500 (EMA cluster)
- 0.6419 (two-month low from August 1)
- 0.6372 (three-month low from June 23)
If AUD/USD breaks below the EMA support zone, the pair could lose further momentum, exposing the 0.6419 level. Conversely, a push above 0.6600 may signal renewed strength and invite buying interest.
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