The Australian Dollar (AUD) lost momentum against the US Dollar (USD) on Wednesday, weighed down by weaker-than-expected retail sales data. However, the AUD/USD pair found partial support from improved global risk sentiment and persistent expectations of US Federal Reserve rate cuts in the second half of 2025.
🔹 AUD/USD Technical Analysis
At the time of writing, AUD/USD is trading near 0.6570, pulling back slightly from its eight-month high of 0.6590 hit earlier this week. The pair continues to trade within a bullish ascending channel, signaling ongoing upward momentum.
The 14-day Relative Strength Index (RSI) remains above the 50 level, suggesting that buying pressure still dominates. Moreover, AUD/USD is holding above the 9-day Exponential Moving Average (EMA) at 0.6540, reinforcing short-term bullish momentum.
Key Resistance Levels:
- 0.6590 (8-month high from July 1)
- 0.6650 (upper boundary of the ascending channel)
Key Support Levels:
- 0.6540 (9-day EMA)
- 0.6490 (channel support)
- 0.6462 (50-day EMA)
A sustained drop below 0.6540 could shift short-term momentum in favor of sellers, while a breakout above 0.6590 would likely trigger further gains toward 0.6650.
🔹 Australian Retail Sales Disappoint
The Australian Bureau of Statistics reported that retail sales rose just 0.2% MoM in May, falling short of the 0.4% market expectation. Although the data marked an improvement from April’s flat reading, the soft result highlighted sluggish consumer spending amid elevated cost pressures and cautious household sentiment.
Meanwhile, building permits rose by 3.2% in May, rebounding from a -4.1% drop in April, but still missed expectations of a 4.8% increase. Australia’s S&P Global Manufacturing PMI also edged lower to 50.6, signaling a modest slowdown in factory activity.
🔹 Global Drivers Supporting the Aussie
Despite the local data setback, China’s Caixin Manufacturing PMI rose to 50.4 in June, beating expectations and supporting the Australian Dollar due to close trade ties between the two economies.
Additionally, news that US trade officials are pursuing phased tariff deals—rather than comprehensive agreements—has improved global risk sentiment, reducing demand for the safe-haven USD.
🔹 Fed Outlook and US Economic Developments
The US Dollar Index (DXY) has stabilized near 96.70, halting its recent decline. Investors now await the June ADP Employment Change report, which could influence expectations for upcoming Fed rate decisions.
Federal Reserve Chair Jerome Powell reiterated that while the Fed will remain data-dependent, rate cuts are possible as early as July. Treasury Secretary Bessent also expressed confidence that the first rate cut will occur no later than September.
Meanwhile, the US ISM Manufacturing PMI rose to 49.0 in June (from 48.5), while JOLTS job openings climbed to 7.76 million, both exceeding forecasts and potentially capping further AUD/USD gains in the short term.
🔹 Outlook for AUD/USD
The AUD/USD outlook remains cautiously bullish, supported by improving sentiment and dovish Fed expectations. However, disappointing Australian data and stronger-than-expected US figures may limit upside potential.
Bullish Scenario: A sustained move above 0.6590 would confirm a bullish breakout toward 0.6650.
Bearish Scenario: A break below 0.6540 could drag the pair toward 0.6490 and eventually 0.6462 (50-day EMA).
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