AUD/USD Steadies Near 0.6500 as Traders Weigh Central Bank Signals and Economic Data

The Australian dollar is holding steady against the US dollar, with AUD/USD hovering near the 0.6500 mark after a two-day rally. This stabilization comes as traders digest diverging signals from the Reserve Bank of Australia (RBA) and the US Federal Reserve.

Softer Australian inflation data has fueled expectations of an RBA rate cut in July, while the Fed’s steady hand and hawkish tone from Chair Jerome Powell have left markets pricing in a US rate cut for September, but with limited conviction. Both currencies remain delicately balanced due to this divergence.

Australian Inflation Softens, Raising Rate Cut Bets

Australia’s latest Monthly Consumer Price Index (CPI) data showed inflation easing to 2.1% year-over-year in May, below both market expectations and the previous month’s 2.4%.

This softer print has strengthened the case for a near-term RBA rate cut, with markets now widely expecting action at the central bank’s July meeting.

The data also signals that price pressures are receding, which may give policymakers room to support growth as global headwinds persist.

Did you know?
The Australian Dollar is often considered a “barometer currency” for global risk appetite, rising during periods of optimism and falling when investors seek safety in the US Dollar.

US Dollar Finds Support from Fed and Yields

On the US side, the dollar’s losses have been limited by Powell’s continued optimism about the American economy and a cautious approach to monetary policy.

While traders still anticipate a rate cut in September, Powell’s testimony has reinforced the Fed’s data-dependent stance, keeping Treasury yields supported and preventing a deeper slide in the greenback.

This dynamic has contributed to the AUD/USD pair’s consolidation, as neither side gains a decisive edge.

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Technical Picture Points to Key Levels

Technically, AUD/USD remains within an ascending channel, with the pair trading above its 200-day Simple Moving Average and testing the psychological 0.6500 level.

Immediate resistance lies near the recent seven-month high at 0.6551, while support is found at the nine-day EMA around 0.6486 and the lower boundary of the channel near 0.6450.

Momentum indicators, including the RSI, remain constructive but suggest the pair may be due for a pause or pullback if bullish momentum fades.

Global Growth and Risk Sentiment Remain in Focus

Beyond central bank policy, broader risk sentiment and global growth prospects are influencing the Aussie dollar. The easing of geopolitical tensions, especially after the Israel-Iran ceasefire, has supported risk-on flows and positively impacted the Australian dollar (AUD).

However, uncertainties remain around China’s economic outlook and the durability of Australia’s own expansion, with recent data showing mixed signals from key trading partners and domestic sectors.

Traders are watching for the next catalyst that could break AUD/USD out of its current range.