AUD/USD climbs as Chinese Yuan strength supports the Aussie

• AUD/USD advances toward 0.6960, supported by a softer US Dollar and renewed strength in the Chinese Yuan.
• Trump’s warning that the Iran ceasefire is “over” is weighing on risk sentiment and limiting the pair’s upside.
• Next week’s US CPI and Australia’s Consumer Inflation Expectations will be key to the Fed's and RBA's policy outlooks.

AUD/USD advances toward the 0.6960 area on Friday, supported by a softer US Dollar (USD) and renewed strength in the Chinese Yuan (CNY). The pair continues to recover on the four-hour chart, although escalating tensions between the United States (US) and Iran are limiting broader risk appetite.

US President Donald Trump said on Truth Social that Iran had requested further negotiations and that Washington had agreed to continue talks. However, Trump warned that the ceasefire was “over,” raising concerns that hostilities could intensify despite diplomatic channels remaining open.

Meanwhile, the Chinese Yuan strengthened to a one-week high against the US Dollar, offering additional support to the Australian Dollar given Australia’s close trade ties with China. The move followed a stronger fixing from the People’s Bank of China (PBOC), which set the USD/CNY midpoint at 6.7989, below the key 6.8000 level.

The latest price action also points to improving momentum in AUD/USD. The pair is trading above its short and medium-term moving averages, while the Relative Strength Index (RSI) remains in positive territory without signaling overbought conditions.

Looking ahead, investors will closely monitor next week’s US Consumer Price Index (CPI) report. A stronger-than-expected inflation reading could reinforce expectations that the Federal Reserve (Fed) will maintain a restrictive policy stance, supporting the USD and limiting further gains in AUD/USD. Softer inflation, by contrast, could weigh on the Greenback and help the pair extend its advance.

In Australia, attention will turn to Consumer Inflation Expectations. The report will offer fresh insight into how households expect prices to develop over the coming year and could influence expectations surrounding the Reserve Bank of Australia’s policy outlook.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.6956, retaining a mildly bullish tone as it holds above both the 20-period Simple Moving Average (SMA) at 0.6938 and the 100-period SMA at 0.6934. The clustering of short and medium-term SMAs beneath price suggests a supportive backdrop, while the RSI around 58 indicates constructive but not overextended bullish momentum, leaving room for further upside provided immediate overhead barriers are challenged.

On the topside, initial resistance is aligned at 0.6958, ahead of a tighter cap at 0.6961, with a more notable barrier emerging at 0.6970, where buying pressure could start to fade if momentum cools. On the downside, first support is seen at 0.6949, followed by the 20-period SMA at 0.6938 and the 100-period SMA at 0.6934, where a break back below these levels would undermine the current constructive bias and hint at a deeper correction.

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