AUD/USD slips as cooling US–China trade tensions lower demand for the safe-haven US dollar. At the same time, weak Australian data and growing expectations of further rate cuts continue to pressure the local currency.
Trade Progress Weakens USD Appeal
US and Chinese officials appear to have made progress on trade talks, easing tensions that previously spooked global markets. The agreement, though still awaiting final approval from both presidents, is reportedly built on a framework established during earlier discussions in Geneva.
As a result, potential tariff reductions are back on the table. Market chatter suggests that Chinese rare earth exports may be exchanged for eased restrictions on US tech exports. These developments support risk appetite and temporarily weaken the appeal of the US dollar as a safe-haven asset.
Weak Local Data Adds Pressure on the Australian Dollar
Despite improved global sentiment, the Australian dollar remains under pressure. Last week’s first-quarter GDP data missed expectations, underlining the economy’s struggle to gain traction. Consumer confidence also edged up only slightly in May, rising by just 0.5% according to Westpac’s latest survey.
The Reserve Bank of Australia cut interest rates by 25 basis points recently. Forward markets now price in a 72% chance of another cut in July. Traders expect up to 73 basis points of additional easing by year-end. These expectations are weighing further on the AUD.
Technical Levels to Watch as AUD/USD Slips
AUD/USD slipped from the top of its recent range after failing to break higher. Since rebounding in May from April’s low of 0.5912, the pair has moved between 0.6350 and 0.6540. This consolidation continues to play out near the 200-day moving average, currently around 0.6436.
If support holds near 0.6350, the next upside target is around 0.6740. That level aligns with the 200-week moving average and a descending trendline from the February 2021 high.
Until a breakout occurs, traders will remain focused on both global risk developments and domestic monetary policy signals. With AUD/USD slipping under pressure, upcoming data releases could provide the next catalyst.