Australian Dollar recovers as US Dollar eases on profit-taking

• AUD/USD recovers as weaker US Dollar as the broader outlook for the pair remained negative.
• The US Dollar eased as investors took profits ahead of month-end and quarter-end adjustments following a two-week rally.
• China remains a key driver for the Aussie, as stronger Chinese activity or stimulus could support AUD demand.

AUD/USD is recovering near 0.6900 on Friday as the US Dollar (USD) weakens, with investors taking profits ahead of the end of the semester after a two-week rally in the Greenback. The move helped the Australian Dollar (AUD) recover some intraday ground, although the full picture remains negative.

The Greenback came under pressure as traders locked in gains following its recent advance, reducing demand for the currency ahead of month-end and quarter-end portfolio adjustments.

China’s economic momentum is closely linked to demand for Australian exports, especially commodities such as iron ore and coal. Any signs of stronger Chinese activity or additional stimulus tend to support the Aussie, while weaker Chinese data can quickly weigh on AUD sentiment.

Lately, Chinese macro figures have painted a mixed picture: tepid consumption, as reflected in a sharp decline in May Retail Sales, a consumption indicator, alongside steady growth in Industrial Production.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.6904, holding a capped bias as it oscillates around the 20-period Simple Moving Average (SMA) at 0.6904 while remaining well beneath the 100-period SMA at 0.7016. The cluster of overhead horizontal levels at 0.6906 and 0.6917 reinforces the notion of near-term supply, while the Relative Strength Index (RSI) at 39 stays below the neutral 50 line, hinting that recovery attempts could struggle unless buyers reclaim these nearby resistances.

On the downside, immediate support is seen at 0.6887, followed by a lower horizontal floor at 0.6876, where a deeper pullback could attempt to stabilize. On the topside, initial resistance aligns at 0.6906, ahead of 0.6917, with the 100-period SMA at 0.7016 marking a more significant barrier that would need to be overcome to challenge the prevailing bearish tone.

(The technical analysis of this story was written with the help of an AI tool.)