Australian Dollar Rises Amid Ceasefire-Driven Risk-On Sentiment and Softer Inflation Data

The Australian Dollar (AUD) extended its winning streak on Wednesday, buoyed by easing geopolitical tensions and domestic inflation data. The AUD/USD pair climbed above 0.6510, marking its third consecutive day of gains as risk sentiment improved following a ceasefire agreement between Israel and Iran.

🇦🇺 Australia’s CPI Slows to 2.1% in May

Australia’s Monthly Consumer Price Index (CPI) rose by 2.1% year-over-year in May, slightly below market expectations of 2.3% and April’s 2.4% reading. This marks a softening trend after three months of steady inflation and supports growing expectations of a rate cut by the Reserve Bank of Australia (RBA) at its July meeting.

Market participants are currently pricing in an 80% probability of a 25 bps rate cut next month, with cumulative cuts of around 73 bps anticipated by year-end. Weaker GDP growth and softening inflation are reinforcing these expectations.

🕊️ Geopolitical Relief Supports Aussie Strength

The AUD also benefitted from improved global risk appetite after US President Donald Trump announced a ceasefire between Israel and Iran, ending a 12-day conflict. While some concerns remain about the durability of the truce, investor sentiment has turned more optimistic, favoring risk currencies like the Aussie.

Markets are also closely monitoring developments around Iran’s nuclear program and the potential revival of diplomatic negotiations.

💬 Fed Commentary Mixed, Eyes on Powell’s Testimony

On the US side, the US Dollar Index (DXY) edged lower, trading near 97.90, as traders awaited Federal Reserve Chair Jerome Powell’s second day of congressional testimony.

Powell reiterated that the Fed is likely to delay interest rate cuts until later this year, although he acknowledged that tariff pressures may soon impact inflation. Other Fed officials provided a mixed outlook:

• Michelle Bowman said rate cuts may be appropriate soon.
• Christopher Waller noted that cuts could begin as early as next month.
• Neel Kashkari and Jeff Schmid urged patience to assess the full impact of tariffs and inflation risks.

This policy uncertainty continues to weigh on the USD, further supporting AUD/USD upside.

📊 Australian PMI Data Holds Steady

Australia’s S&P Global Manufacturing PMI remained unchanged at 51.0 in June. The Services PMI rose to 51.3 from 50.6, while the Composite PMI increased to 51.2, indicating continued expansion in economic activity.

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📈 AUD/USD Technical Outlook: Bullish Momentum Strengthens

The AUD/USD pair trades above 0.6510, staying within a bullish ascending channel pattern. The 14-day RSI is slightly above 50, indicating ongoing bullish momentum. Additionally, the pair has moved above the 9-day EMA (0.6486), supporting the case for further upside.

🔼 Key Resistance Levels:

• 0.6552 – Seven-month high (June 16)
• 0.6570 – Ascending channel’s upper boundary

🔽 Key Support Levels:

• 0.6486 – 9-day EMA
• 0.6450 – Lower channel boundary
• 0.6438 – 50-day EMA

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Bottom Line:
The Australian Dollar remains well-supported by a mix of geopolitical optimism, softer inflation, and a weaker US Dollar. A breakout above recent highs could open the door for a rally toward 0.6570, while upcoming Fed policy clues and Middle East developments will remain key drivers for the AUD/USD pair.

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