Australian Dollar Stays Soft as RBA Hints at More Rate Cuts and Tariff Uncertainty Looms

The Australian Dollar (AUD) remains under pressure on Tuesday, slipping further against the US Dollar (USD) after two consecutive days of losses. The weakness comes as traders digest the Reserve Bank of Australia’s (RBA) July meeting minutes, which suggest that more interest rate cuts may be on the horizon.

RBA Stays Cautious, Signals More Easing Likely

According to the RBA minutes, board members agreed that further policy easing is likely necessary over time. However, most emphasized a need to confirm that inflation is slowing before initiating additional rate cuts. The central bank has already delivered three rate reductions in its past four meetings—any further moves are expected to be more gradual and data-dependent.

This dovish stance has kept the AUD under pressure, especially as global trade uncertainties continue to weigh on risk sentiment.

Tariff Tensions and China Ties Add Pressure

Investors remain focused on potential developments in US-China trade relations ahead of the August 12 deadline. US Commerce Secretary Howard Lutnick reiterated in a televised interview that the new tariffs would take effect on August 1 unless a deal is reached.

Meanwhile, the People’s Bank of China (PBoC) opted to hold its one- and five-year Loan Prime Rates steady at 3.00% and 3.50%, respectively. Given Australia’s strong trade ties with China, any softening in Chinese economic conditions can have direct implications for the AUD.

US Dollar Recovers, But Fed Uncertainty Lingers

The US Dollar Index (DXY) has steadied around 97.90 after a sharp decline of more than 0.50% earlier. Despite the rebound, investor sentiment remains fragile due to growing concerns over the independence of the US Federal Reserve.

Reports circulated that President Donald Trump may remove Fed Chair Jerome Powell, though Trump dismissed the claims as “typically untruthful.” Separately, Fed Governor Christopher Waller and San Francisco Fed President Mary Daly both hinted at the potential need for rate cuts in upcoming meetings due to rising economic risks.

Still, FOMC Governor Adriana Kugler pushed back on dovish expectations, arguing that rate cuts should be delayed to counter the inflationary effects of recent tariffs.

China’s Economic Data Shows Mixed Signals

China’s GDP rose 5.2% year-on-year in Q2, slightly below Q1’s 5.4% but above market expectations. Retail sales and industrial output data, however, fell short of forecasts. With China being a key export destination for Australia, these mixed signals add further uncertainty to the AUD outlook.

China’s Commerce Minister Wang Wentao emphasized the importance of stable US-China economic ties, noting that recent frameworks have helped reduce tensions.

Technical Outlook: AUD/USD Faces Resistance at 0.6524

At the time of writing, AUD/USD is hovering around 0.6520. The pair is moving within an ascending channel pattern, with the 14-day RSI near the 50 level—indicating neutral momentum. However, the price is trading just below the nine-day Exponential Moving Average (EMA), suggesting near-term weakness.

• Resistance: A push above the 9-day EMA at 0.6524 could fuel further gains toward the eight-month high of 0.6595.
• Support: Immediate support lies at the 50-day EMA of 0.6493. A break below this level could lead the pair toward the lower boundary of the ascending channel near 0.6470 and the three-week low at 0.6454.

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