Australian Dollar Steady as Traders Await CPI Data and US-China Trade Developments

The Australian Dollar (AUD) held firm near $0.6570 on Monday as traders adopted a wait-and-see approach ahead of pivotal economic events and geopolitical developments. After two days of losses, the AUD/USD pair saw modest gains, supported by improved global risk sentiment following the US-EU trade deal.

US-EU Trade Deal Boosts Risk Appetite

Global sentiment improved as the United States and European Union reached a significant trade agreement over the weekend. The deal, which imposes a 15% tariff on EU exports to the US starting August 1, also includes commitments to ramp up European purchases of US energy and defense products. The resolution of months-long trade tensions has helped ease fears of a global slowdown, weakening demand for the safe-haven US Dollar and benefiting risk-linked currencies like the Aussie.

US-China Truce Extension in Focus

Markets are also watching for updates from the US-China trade dialogue. A meeting between US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng is scheduled in Stockholm on Monday. Reports suggest that both countries may extend their current tariff truce by another three months, a move that could further bolster global trade optimism. Given Australia’s close trade ties with China, any positive momentum could provide further upside for the AUD.

Key Inflation Data to Drive RBA Outlook

Investors now turn their attention to Australia’s Q2 Consumer Price Index (CPI) data, due on Wednesday. The data is expected to be a key input for the Reserve Bank of Australia’s (RBA) next rate decision. RBA Governor Michele Bullock recently emphasized the importance of keeping inflation in check amid global uncertainties. Minutes from the last RBA meeting suggest policymakers prefer a cautious approach, awaiting stronger confirmation of disinflation before implementing further rate cuts.

Greenback Under Pressure Despite Resilient US Data

The US Dollar Index (DXY) extended losses into a third straight session, hovering around 97.60. While the US labor market remains resilient—jobless claims fell to 217,000 last week and the services PMI rose to 55.2—investors are increasingly expecting the Federal Reserve to hold rates steady this week, with growing bets on a rate cut in September. Comments from Fed officials remain mixed, with some advocating patience, while others hint at near-term easing.

Technical Outlook: AUD/USD Supported by EMA and Bullish Momentum

AUD/USD currently trades near $0.6570, showing signs of strength above the nine-day Exponential Moving Average (EMA) at $0.6560. The pair remains within an ascending channel on the daily chart, supported by a 14-day RSI reading above 50.

• Immediate resistance lies at the eight-month high of $0.6625. A breakout could see the pair test $0.6680, the upper boundary of the channel.
• Initial support is seen at the nine-day EMA near $0.6560. A break below may lead to a test of the 50-day EMA at $0.6508 and potentially the channel’s lower boundary around $0.6490.

Summary

The Australian Dollar remains steady as traders await Australian CPI data and developments in US-China trade talks. The US-EU trade deal has already improved market sentiment, and upcoming data from both Australia and the US will likely determine the next directional move for AUD/USD.

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