Australian Dollar Holds Steady Despite Middle East Turmoil and China Policy Pause

The Australian Dollar (AUD) managed to regain some ground on Friday, defying the growing global risk aversion triggered by intensifying Middle East tensions. This resilience came after the People’s Bank of China (PBoC) opted to maintain its Loan Prime Rates (LPRs)—keeping the 1-year LPR at 3.00% and the 5-year at 3.50%, signaling cautious optimism in Asia’s largest economy.

Geopolitical Tensions Weigh on Risk Sentiment

While the PBoC’s move stabilized regional markets, rising fears of direct US involvement in the Israel-Iran conflict overshadowed risk assets globally. Reports indicate the White House is preparing for potential military strikes on Iran, and President Trump may decide within two weeks whether to proceed. US intelligence has warned that a strike on Iran’s nuclear facilities could prompt Tehran to accelerate its weapons program.

This uncertainty has boosted safe-haven demand for the US Dollar, but despite the DXY trading near 98.60, the greenback weakened slightly due to technical pullbacks and Fed caution.

---

Australian Labor Data Signals Fragility

Australia’s latest employment figures disappointed, showing a drop of 2.5K jobs in May, a sharp contrast to April’s upwardly revised 87.6K gain. Meanwhile, the unemployment rate held steady at 4.1%, matching forecasts. Although labor conditions remain stable, the soft employment print reinforces concerns about domestic economic momentum.

---

US Fed Signals Patience, Markets React Cautiously

The Federal Reserve held interest rates at 4.5% in its June meeting, in line with market expectations. However, Fed Chair Jerome Powell emphasized a data-dependent approach going forward, warning that future rate cuts will hinge on labor market improvements and inflation cooling. The Fed still projects up to 50bps in rate cuts by the end of 2025.

Market participants are closely watching the Fed’s Monetary Policy Report, due Friday, for further clarity.

---

China Data Offers Mixed Signals

Fresh economic data from China provided a mixed picture:

✅ Retail Sales rose 6.4% YoY in May, beating forecasts of 5.0%.
✅ Industrial Production increased 5.8%, slightly below expectations of 5.9%.

The National Bureau of Statistics (NBS) stated that China’s economy remains broadly stable but warned that growth may slow in Q2 2025 amid trade uncertainties and weak global demand—an outlook closely watched by AUD traders, given Australia’s heavy reliance on Chinese exports.

---

AUD/USD Technical Outlook: Cautious Optimism Builds

At the time of writing, AUD/USD is trading near 0.6480, with bulls attempting a rebound from recent lows. The daily chart shows the pair testing the 9-day EMA at 0.6492, a key short-term resistance level.

🔹 Support Levels:

• 50-day EMA at 0.6436
• Psychological level at 0.6400
• March 2020 low at 0.5914 (extreme scenario)

🔹 Resistance Levels:

• 0.6492 (9-day EMA)
• 0.6552 (7-month high from June 16)
• 0.6687 (8-month high)
• Upper channel boundary near 0.6760

The 14-day RSI currently holds slightly above 50, indicating moderate bullish momentum. A sustained break above the EMA and return to the ascending channel could fuel a move toward 0.6550 and beyond.

---

Key Drivers to Watch

• Middle East conflict developments (especially US-Iran decisions)
• Fed Monetary Policy Report
• China’s economic outlook and trade dynamics
• RBA guidance and Australian economic indicators

---

📌 Stay tuned to DailyForex.pk for live AUD/USD analysis, global market forecasts, and geopolitical updates that shape currency movements.