Australian Dollar hovers near a psychological level after retreating from six-month highs
- The Australian Dollar holds its position near a psychological 0.6500 level after pulling back from a six-month high of 0.6537.
- The AUD faces few challenges due to a dovish sentiment surrounding the RBA’s policy outlook.
- The US Dollar struggles over fiscal deficit concerns as Trump's tax bill is set to be voted on in the Senate.
The Australian Dollar (AUD) remains subdued against the US Dollar (USD) for the second successive day on Tuesday. However, the AUD/USD pair maintains its position near a psychological 0.6500 level after pulling back from a six-month high of 0.6537, which was reached on Monday. However, the continued decline in the US Dollar provides support for the pair, which could be attributed to growing fears over the United States' (US) debt concerns.
The AUD/USD pair could regain its ground as the Greenback faces additional challenges amid improving risk-on sentiment, driven by the easing trade tension between the United States (US) and the European Union (EU). US President Donald Trump extended the tariff deadline on the European Union (EU) from June 1 to July 9 after having a phone call with European Commission President Ursula von der Leyen on Sunday. On Friday, Trump threatened to impose a 50% tariff on imports from the European Union (EU).
The Reserve Bank of Australia (RBA) is expected to deliver further interest rate cuts in the upcoming policy meetings, which could put a limit on the Australian Dollar’s upside. The Australian central bank delivered a 25 basis point interest rate cut in the previous week. Moreover, Governor Michele Bullock stated that the central bank is prepared to take additional action if the economic outlook deteriorates sharply, raising the prospect of future rate cuts.
The AUD received support from the 90-day US-China trade truce, along with expectations of further US trade deals with other countries. Markets would closely monitor further developments on US-China trade negotiations, as China is a major trading partner of Australia.
Australian Dollar remains subdued despite a weaker US Dollar amid rising debt concerns
- The US Dollar Index (DXY), which measures the value of the Greenback against six major currencies, is continuing to lose ground for the third successive session on Tuesday. The DXY is trading around 98.80 at the time of writing. Traders will likely observe the Durable Goods Orders, the Dallas Fed Manufacturing Index, and the Conference Board’s Consumer Confidence report due later in the North American session.
- The US fiscal deficit could increase further when Trump's “One Big Beautiful Bill” goes through the Senate floor, increasing the risk of bond yields staying higher for longer. Higher bond yields can keep borrowing costs higher for consumers, businesses, and governments.
- Trump’s bill is expected to increase the deficit by $3.8 billion, as it would deliver tax breaks on tip income and US-manufactured car loans, according to the Congressional Budget Office (CBO).
- US Senator Ron Johnson told CNN on Sunday that "I think we have enough votes to stop the process until the president gets serious about spending reduction and reducing the deficit.” Johnson added, “My primary focus now is spending. This is completely unacceptable. Current projections are a $2.2 trillion per year deficit.”
- While speaking in Japan on Monday, Minneapolis Fed President Neel Kashkari noted that “uncertainty is top of the mind for Fed, US businesses.” Kashkari said that extended tariffs increase the risk of stagflation, questioning the scale of stagflation. He expressed doubts that the picture would be clear enough by September.
- Chicago Federal Reserve (Fed) President Austan Goolsbee said on Friday that Trump’s latest tariff threats likely postpone changes to interest rates. Meanwhile, Kansas City Fed President Jeffrey Schmid noted that policymakers will gauge hard data before formulating interest rate decisions, and the Fed needs to be careful how much emphasis it puts on soft data.
- Fed Governor Christopher Waller noted on Thursday that markets are monitoring fiscal policy. Waller further stated that if tariffs are close to 10%, the economy would be in good shape for H2, and the Fed could be in a position to cut later in the year.
- The US Dollar continues to struggle after Moody’s downgraded the US credit rating from Aaa to Aa1, following similar downgrades by Fitch Ratings in 2023 and Standard & Poor’s in 2011. Moody’s now projects US federal debt to climb to around 134% of GDP by 2035, up from 98% in 2023, with the budget deficit expected to widen to nearly 9% of GDP. This deterioration is attributed to rising debt-servicing costs, expanding entitlement programs, and falling tax revenues.
- China’s Commerce Ministry said last week that US measures on China’s advanced chips are ‘typical of unilateral bullying and protectionism’ and impede the stability of the global semiconductor industry chain and supply chain. Chinese authorities asked the United States to swiftly correct its wrong practices.
- Traders will keep an eye on Australia-China relations as China’s ambassador has criticised Australia’s plan to renege Darwin Port lease. The port was leased to the Chinese company Landbridge in 2015 for 99 years. The Chinese embassy called this decision an unfair and unethical move, per Reuters.
Australian Dollar remains below 0.6500 after retreating from six-month highs
The AUD/USD pair is trading around 0.6490 on Tuesday, with daily technical indicators suggesting a persistent bullish bias as the pair remains above the nine-day Exponential Moving Average (EMA). Moreover, the 14-day Relative Strength Index (RSI) is maintaining its position above the 50 mark, supporting an upward outlook.
The AUD/USD pair could test a six-month high at 0.6537. A successful break above this level could reinforce the bullish bias and lead the pair to approach the seven-month high at 0.6687, recorded in November 2024.
On the downside, the nine-day EMA of 0.6456 would act as an immediate support, followed by the 50-day EMA near 0.6380. The decisive break below these levels would weaken the short- and medium-term price momentum and open the doors for the pair to navigate the region around 0.5914, the lowest since March 2020.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.14% | -0.13% | -0.44% | -0.07% | -0.01% | 0.03% | -0.18% | |
| EUR | 0.14% | -0.01% | -0.31% | 0.08% | 0.05% | 0.08% | -0.06% | |
| GBP | 0.13% | 0.00% | -0.27% | 0.08% | 0.06% | 0.08% | -0.10% | |
| JPY | 0.44% | 0.31% | 0.27% | 0.40% | 0.44% | 0.40% | 0.27% | |
| CAD | 0.07% | -0.08% | -0.08% | -0.40% | 0.03% | 0.00% | -0.17% | |
| AUD | 0.01% | -0.05% | -0.06% | -0.44% | -0.03% | -0.06% | -0.23% | |
| NZD | -0.03% | -0.08% | -0.08% | -0.40% | -0.01% | 0.06% | -0.21% | |
| CHF | 0.18% | 0.06% | 0.10% | -0.27% | 0.17% | 0.23% | 0.21% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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