AUD/USD Climbs Back Above 0.6500 as US Dollar Weakens, Aussie Sentiment Improves

The Australian Dollar (AUD) rebounded strongly in Thursday’s Asian session, with AUD/USD regaining the 0.6500 handle after a brief pullback from its year-to-date highs. Renewed weakness in the US Dollar and rising Australian Consumer Inflation Expectations supported the move, despite ongoing geopolitical tensions in the Middle East.

📊 Key Technical Levels to Watch

The pair finds immediate resistance at:

0.6545 – the 2025 peak recorded on June 11
0.6687 – November 2024 high
0.6942 – the 2024 top reached in late September

On the downside, initial support lies at:

0.6434 – the critical 200-day Simple Moving Average (SMA)
0.6356 – May 12 low
0.6342 – the 100-day SMA
0.6000 – key psychological support

📈 Momentum indicators point to strength:

ADX crosses above 26 – indicating a strengthening bullish trend
RSI bounces back above 59 – suggesting room for further upside

🧭 Fundamental Outlook: Central Banks Drive Direction

The Australian Dollar briefly lost ground midweek but regained strength after AUD/USD touched fresh yearly highs in the 0.6540–0.6550 zone. The recovery aligns with a broader weakening of the US Dollar, fueled by softer US inflation and dovish Fed sentiment.

✅ Federal Reserve:
At its May meeting, the Fed held interest rates steady. Chair Jerome Powell reiterated a data-driven approach, noting slower inflation and weakening growth indicators. Markets now price in a 68% chance of a rate cut by September.

✅ Reserve Bank of Australia (RBA):
The RBA delivered a 25 basis point rate cut, bringing its cash rate to 3.85%. It signaled a gradual path forward, forecasting a drop to 3.20% by 2027, with inflation moderating to 2.6% and GDP slowing to 2.1% in 2025.
Minutes from the meeting showed the RBA is open to deeper cuts if needed, while remaining cautious of external risks that could impact recovery.

🇨🇳 China’s Fragile Recovery Weighs on AUD Sentiment

Australia’s heavy economic reliance on China continues to pose a challenge. While industrial output beat forecasts, weak retail sales and sluggish investment revealed deeper vulnerabilities in China’s growth story.

PBoC slashed its 1-Year and 5-Year Loan Prime Rates to 3.00% and 3.50%, respectively
Caixin Manufacturing PMI fell further into contraction
June CPI showed a -0.1% YoY decline, indicating deflationary risks

📉 Speculators Grow Bearish on AUD

According to CFTC data (as of June 3), speculative net short positions on the Australian Dollar rose to 63.2K contracts – the highest in several weeks. This highlights growing caution among traders amid external economic uncertainties and domestic rate cut expectations.

🔍 AUD/USD Forecast
The pair’s outlook remains tied to central bank policy, US inflation trends, and Chinese economic performance. A sustained break above 0.6545 could open the door to further gains, while failure to hold above the 200-day SMA at 0.6434 may signal renewed downside pressure.

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saad