- AUD/USD climbed to fresh 2025 tops around 0.6570 on Monday.
- There was no respite for the US Dollar’s pullback, reaching new multi-year lows.
- Optimism on the trade front and prospects of Fed easing dominated the sentiment.
The Australian Dollar (AUD) continued its winning streak in quite a promising start to the new trading week, edging up to new multi-month peaks vs. the US Dollar (USD), sending AUD/USD to the 0.6770 region.
The move continued to be underpinned by a decisive break above the 200-day simple moving average (SMA) around 0.6420, a technical milestone that has brightened near-term sentiment toward the currency.
Domestic backdrop: Inflation tamed, activity solid
May’s monthly consumer price index eased to 2.1% from 2.4% in April, neatly inside the Reserve Bank of Australia’s (RBA) 2%–3% target band.
In addition, early-June PMIs echoed the domestic economy’s resilience, with manufacturing at 51.0 and services at 51.3, both still in expansionary territory.
China: Momentum vs. headwinds
According to the latest data, Australia’s largest trading partner painted a mixed picture.
Indeed, industrial output, retail sales, and broader services all accelerated in May, reviving the idea that the economy would expand around the annualised 5% milestone.
Monday’s NBS data saw the Manufacturing PMI and the Non-Manufacturing PMI improving marginally in June to 49.7 and 50.5, respectively.
Yet property-sector strains and a gradual withdrawal of stimulus threaten to sap that momentum until late 2025.
The PBoC held its 1-Year and 5-Year Loan Prime Rates (LPR) at 3.00% and 3.50%, respectively, while funnelling CNY 300 billion into banks through a 1-Year medium-term lending facility (MLF) in late June.
Diverging central-bank paths
At home, the RBA trimmed its cash rate by 25 basis points to 3.85% last month, signalling a measured glide path toward 3.20% by 2027 and rebuffing calls for a deeper “insurance” cut.
The Federal Reserve (Fed), meanwhile, kept policy steady but maintained guidance for two half-point reductions before year-end. Chair Jerome Powell cautioned that tariffs could reignite goods inflation over the summer.
Shifting market positioning
The latest CFTC data show speculators adding to their already bearish bets on the Aussie. Net shorts increased to nearly 96K contracts as of 24 June, the highest tally since April, while open interest rose to its highest in two weeks, just over 151K contracts.
Chart levels to watch
Key resistance sits first at 0.6572, the 2025 high (June 30), followed by the November 2024 top at 0.6687 (November 7), and the 2024 ceiling of 0.6942, before the psychologically important 0.7000 barrier.
On the downside, initial support is expected at the 200-day SMA at 0.6420, then the June trough at 0.6372 (June 23), and the May low of 0.6356 (May 12). A deeper slide would bring the 0.6000 milestone into focus ahead of the 2025 bottom at 0.5913 (April 9).
The technical backdrop remains constructive: the Relative Strength Index (RSI) has climbed above 60, hinting at further upside momentum, while the Average Directional Index (ADX) near 21 still signals a moderately firm trend.
AUD/USD daily chart
Short-term outlook
AUD/USD seems to have broken above its multi-week consolidation band. Beijing’s policy mix and any surprise shift in US trade settings are the most obvious swing factors, though neither looks imminent. Markets are already bracing for another modest RBA cut later this year, but expect the bank to move cautiously rather than embark on an aggressive easing cycle.
Bottom line: barring a shock from abroad, the Aussie’s constructive stance looks set to hold in the short term, with incremental gains favoured as long as it stays north of its 200-day SMA.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
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