AUD/USD Slips Below 0.6550 as Dollar Strength and Risk Aversion Weigh

The Australian Dollar (AUD) lost its upward momentum on Tuesday, retreating after five straight sessions of gains. The AUD/USD pair slipped back toward the 0.6520 zone, pressured by a stronger US Dollar (USD) recovery and a cautious risk mood in global markets. Investors now await Australia’s Q2 GDP release, which is expected to show the economy expanded by 0.5% between April and June.

Technical Outlook: Range-Bound for Now

The pair remains locked in a 0.6400–0.6600 consolidation range.

Upside barriers: 0.6568 (August 14 high), 0.6625 (July 24 ceiling), and the November 2024 peak at 0.6687. A decisive breakout could pave the way toward the 0.7000 psychological level.
Downside supports: 0.6414 (August 21 low), followed by the 200-day SMA at 0.6385 and the June 23 floor at 0.6372.

Momentum indicators suggest fading bullish conviction. The RSI slipped back near 52, signaling weaker buying strength, while the ADX dropped below 14, highlighting a lack of trend direction.

Fundamentals Driving the AUD/USD

Inflation Still Running Hot

Australia’s July CPI (Weighted Mean) jumped to 2.8% YoY from 1.9% in June. Q2 CPI also rose 0.7% QoQ and 2.1% YoY, reinforcing concerns about sticky price pressures. This keeps the RBA’s cautious stance intact despite recent rate cuts.

Economic Data Remains Resilient

Australia’s broader economic picture continues to show strength:

PMI (Aug): Manufacturing 53.0, Services 55.1
Retail Sales (Jun): +1.2%
Trade Surplus: A$5.365 billion
Labor Market: Unemployment fell to 4.2% with 24.5K jobs added
Private Capital Expenditure (Q2): +0.2%

These indicators highlight steady domestic demand, even as global risks weigh.

RBA Policy Path

The RBA cut rates by 25 bps to 3.60% earlier this month and lowered its 2025 growth outlook. Governor Michele Bullock stressed policy remains “data-dependent”, ruling out aggressive cuts for now. Markets, however, still anticipate another 25 bps cut by November.

China’s Uneven Recovery in Focus

China’s economic signals remain mixed:

Q2 GDP growth: +5.2% YoY
Industrial output: +7%
Retail sales: Missed expectations
August PMIs: Manufacturing at 49.4, Services at 50.3
Trade surplus narrowed; inflation flat

Given Australia’s deep trade ties, any improvement or slowdown in China’s growth directly impacts the Aussie dollar.

Speculators Add to Aussie Shorts

CFTC data shows net speculative shorts on AUD at their highest since April 2024 (around 100.6K contracts). Open interest also rose for the fourth straight week, reflecting a strong bearish bias in positioning.