Australian Dollar holds steady as US PCE inflation reinforces Fed caution

• AUD/USD remains muted with the Australian Dollar struggling to gain traction despite a pullback in the Greenback.
• US PCE inflation rose to 4.1% YoY in May, while core PCE increased to 3.4% YoY.
• Iran warned that uncoordinated shipping routes through the Strait would be “unacceptable and dangerous.”

The AUD/USD pair trades muted near the 0.6900 area on Thursday, with the Aussie struggling to gain amid a pullback in the US Dollar (USD) as investors digested the latest United States (US) inflation figures and fresh geopolitical risks around the Strait of Hormuz.

Annual inflation in the United States, measured by the Personal Consumption Expenditures (PCE) Price Index, climbed to 4.1% in May from 3.8% in April, according to the Bureau of Economic Analysis. The core PCE Price Index, which excludes volatile food and energy prices, rose to 3.4% YoY, up one-tenth of a point, while monthly headline PCE increased 0.4% and core PCE rose 0.3%.

Australia’s labor market showed signs of recovery in May, with Employment Change rising by 40.3K, above expectations of 25K and rebounding sharply from the previous 40.7K decline. The increase was mainly driven by part-time employment, which rose by 35.2K, while the Unemployment Rate held steady at 4.4%, matching forecasts and easing from the previous 4.5%.

Meanwhile, geopolitical uncertainty added another layer of pressure on the risk-sensitive Australian Dollar, capping its gains. Iran’s Islamic Revolutionary Guard Corps warned that safe passage through the Strait of Hormuz would only be allowed through routes designated by Tehran, calling any newly announced shipping lanes without coordination “unacceptable and dangerous.” It also warned that vessels ignoring instructions could face action.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.6903, maintaining a bearish near-term bias as price remains below both the 20-period Simple Moving Average (SMA) at 0.6929 and the 100-period SMA at 0.7031. The configuration of these SMAs above spot suggests rallies are likely to be sold into, while the Relative Strength Index (RSI) hovering just above the oversold band near 31 hints that downside momentum is still present but may be losing some intensity.

On the topside, initial resistance is located at the 20-period SMA around 0.6929, with a stronger barrier emerging at the 100-period SMA near 0.7031. In the absence of clearly defined indicator-based supports below current levels, traders may instead look to prior price lows on the four-hour chart for interim floors, but the broader structure favors selling into bounces while AUD/USD trades under the clustered moving averages.

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