The Australian Dollar (AUD) continued its downward trend against the US Dollar (USD) on Monday, marking a third straight session of losses. However, AUD/USD saw a brief uptick following the announcement of a new trade agreement between the United States and the European Union (EU).
Market participants are closely monitoring the scheduled meeting between US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng in Stockholm. Sources cited by the South China Morning Post (SCMP) suggest both nations may extend their tariff truce by another three months.
Additionally, the Financial Times reported that the US has frozen certain tech export restrictions to China in a move aimed at easing trade tensions. Given Australia’s strong trade ties with China, developments in the Chinese economy often have a direct impact on the AUD.
Attention now turns to Australia’s Q2 CPI data due Wednesday, which could influence the Reserve Bank of Australia’s (RBA) upcoming rate decision. RBA Governor Michele Bullock reiterated the bank’s commitment to maintaining stable inflation, while also acknowledging global economic uncertainty.
US Dollar Holds Steady as Traders Weigh Data, Fed Commentary
The US Dollar Index (DXY) remains flat near 97.60 after recent gains, as market sentiment steadied on the back of the US-EU trade deal. The agreement, effective August 1, introduces a 15% tariff on most European imports, ending months of trade friction, according to Bloomberg.
Economic data also offered support for the Greenback. Initial Jobless Claims fell to 217,000 last week—marking the sixth straight weekly decline, the longest streak since 2022. The preliminary S&P Global Composite PMI climbed to 54.6 in July, its highest reading in seven months. While the Services PMI rose to 55.2 (vs. 53.0 forecast), Manufacturing PMI dipped to 49.5, signaling contraction.
On the policy front, Treasury Secretary Bessent noted a successor to Fed Chair Jerome Powell may be named by December or January. Meanwhile, Fed Governor Adriana Kugler emphasized that rate cuts should not be rushed due to inflation concerns linked to past tariffs. San Francisco Fed President Mary Daly called two rate cuts this year “reasonable,” while Fed Governor Christopher Waller hinted at a potential rate cut in July.
AUD/USD Technical Outlook: Eyes on EMA Support at 0.6550
AUD/USD is currently trading near 0.6570. Technical indicators suggest a bullish short-term outlook, with the pair holding within an ascending channel and the 14-day Relative Strength Index (RSI) staying above 50. The pair also remains above the nine-day Exponential Moving Average (EMA), which currently sits around 0.6560.
On the upside, a break above the recent eight-month high at 0.6625 could pave the way toward the channel resistance near 0.6680. On the downside, a drop below the nine-day EMA at 0.6560 would open the door to the 50-day EMA at 0.6508 and the lower boundary of the ascending channel near 0.6490.
