AUD/USD Faces Pressure from US Dollar Strength, Weak Jobs Data, and RBA Rate Cut Expectations
The Australian Dollar (AUD) continues to weaken against the US Dollar (USD), despite signs of strength in both domestic and Chinese economic activity. As of Tuesday, the AUD/USD pair extended its losing streak for the second consecutive session, trading near 0.6470 amid global risk concerns and a steady Greenback.
📉 China’s Caixin PMI Beats Forecasts, But AUD Remains Weak
China’s Caixin Services PMI—a key indicator of private sector activity—surged to 52.6 in July, outperforming the market forecast of 50.2. The jump from June’s reading of 50.6 signals improving demand in the region, which typically supports Australian exports. However, the Aussie Dollar failed to benefit, as broader risk sentiment remained cautious and US Dollar demand stayed firm.
🇦🇺 Australia’s Services Sector Expands, Yet Rate Cut Looms
Australia’s own S&P Global Composite PMI rose to 53.8 in July from 51.6 in June, marking its strongest expansion since April 2022. The Services PMI also posted a sharp increase to 54.1—its highest since March 2024. Despite this encouraging data, the Australian Dollar remains under pressure amid expectations that the Reserve Bank of Australia (RBA) will cut interest rates by 25 basis points next week, reducing the cash rate to 3.60%.
Easing inflation, which cooled to 2.7% in June—comfortably within the RBA’s 2–3% target band—combined with slowing wage growth and rising unemployment, has strengthened the case for monetary easing.
🇺🇸 US Dollar Strengthens as Fed Watch Intensifies
The US Dollar Index (DXY) remains firm, holding near 98.80, supported by safe-haven flows and speculation around future Fed policy. All eyes are now on the upcoming US ISM Services PMI, which may influence expectations for the September Federal Reserve meeting.
In a surprising political twist, Federal Reserve Governor Adriana Kugler resigned, giving President Donald Trump an unexpected opportunity to reshape the Fed’s leadership sooner than anticipated. Markets are now on edge as concerns grow about the central bank’s independence and policy direction ahead of the 2024 US election.
Adding to the uncertainty, Trump also dismissed Bureau of Labor Statistics (BLS) Commissioner Erika McEntarfer following a weaker-than-expected Nonfarm Payrolls (NFP) report, which showed just 73,000 jobs added in July. The unemployment rate edged up to 4.2%, aligning with expectations but fueling fears of a slowing labor market.
📜 Tariffs & Trade Talks Cloud Global Outlook
The Trump administration has introduced new tariffs between 10% and 41% on imports from countries including Canada, India, and Taiwan, effective August 1. Meanwhile, US-China talks in Stockholm failed to extend the 90-day tariff truce, with the current pause set to expire on August 12. This heightens uncertainty in global trade, weighing on risk-sensitive currencies like the AUD.
On a more positive note, Australia has been spared from the new US tariffs, which may offer some relative support to the Aussie economy in the near term.
📊 AUD/USD Technical Outlook: Bearish Pressure Builds
Technically, the AUD/USD pair remains in a bearish trend, hovering near 0.6470 with the 14-day Relative Strength Index (RSI) staying below the neutral 50 mark. The price also trades beneath the nine-day Exponential Moving Average (EMA), confirming short-term downward momentum.
- 🔻 Immediate support lies at 0.6419 (August 1 low)
- 🔻 Further downside could target 0.6372, the three-month low from June 23
- 🔺 Resistance is seen at the nine-day EMA (0.6485) and the 50-day EMA (0.6494)
- 🔺 A breakout above these levels may push the pair toward 0.6625, the nine-month high
📌 Key Takeaways for Traders
- ✅ Australian data shows economic resilience, but dovish RBA signals cap AUD upside
- ✅ US political developments add uncertainty around Fed policy direction
- ✅ Weak US labor market data supports expectations for rate cuts in late 2025
- ✅ AUD/USD likely to remain under pressure unless US Dollar weakens or RBA surprises markets
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