AUD/USD Rebounds Amid Fed Dovishness and Weak U.S. Dollar – Can the Rally Last?

The Australian Dollar climbs above 0.6500 as Fed signals soften, but weak domestic data may limit upside potential.

The Australian Dollar (AUD) extended its recovery against the U.S. Dollar (USD) on Friday, pushing the AUD/USD pair beyond the psychological 0.6500 mark. This bullish momentum follows a bounce from three-week lows in the 0.6450s and reflects growing pressure on the greenback amid dovish comments from key Federal Reserve officials.

As of writing, AUD/USD trades near 0.6510, holding gains through the European session. While technicals indicate some bullish momentum, broader market signals present a mixed outlook.

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🔍 Technical Overview: Cautious Optimism

• Support: 50-day EMA at 0.6490, followed by key levels at 0.6460 and 0.6454.
• Resistance: Immediate upside target at 0.6524 (9-day EMA); next key level sits at 0.6595 (July high).
• Indicators:
  • RSI below 50, indicating weakening bullish pressure.
  • Price remains below the 9-day EMA, suggesting fragile short-term momentum.

Unless AUD/USD clears 0.6524 with conviction, the bulls may struggle to break toward the recent high near 0.6595.

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🌏 Fundamental Drivers: Weak USD vs. Soft Aussie Data

Fed Dovishness Lifts Risk Sentiment
Remarks from Fed Governor Christopher Waller, advocating a July rate cut due to mounting economic risks, triggered a broad-based pullback in the USD. This aligned with other dovish voices, including Mary Daly, boosting risk assets like the Aussie.

U.S. Economic Snapshot

• Retail Sales: Jumped 0.6% MoM in June (vs. 0.1% expected).
• PPI: Flat in June, softening from prior months.
• Consumer Sentiment & Housing Data: Awaited later today for further clues.

Despite strong U.S. economic data supporting resilience, the Fed’s cautious tone is capping further Dollar upside.

Australian Labor Market Disappoints

• Jobs Added: Just 2K vs. 20K expected.
• Unemployment Rate: Rose to 4.3% from 4.1%.

Combined with weak Retail Sales from China, Australia’s largest trading partner, the RBA is increasingly expected to ease policy further, tempering enthusiasm for AUD gains.

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🌐 Geopolitics and Trade Tensions Weigh In

President Trump’s latest tariff rhetoric — including 10–20% levies on over 150 countries and threats of further action — has reintroduced global uncertainty. This dynamic is helping safe-haven flows but complicating central bank outlooks globally. Additionally, ongoing tensions with Canada, and trade deal discussions with India and Europe, remain key macro themes.

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📈 Outlook: Can AUD/USD Sustain the Rally?

The AUD/USD rally remains precarious, supported more by USD softness than domestic strength. Traders will be watching:

• A daily close above 0.6524 to confirm short-term bullish continuation.
• Reaction to U.S. Consumer Sentiment data.
• Further signals from Fed speakers or RBA policymakers.

Until then, the pair remains vulnerable to dips back toward the 0.6450–0.6490 zone, especially if sentiment shifts or Fed expectations recalibrate.

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