The Australian Dollar (AUD) extended its gains for the third consecutive session on Thursday, supported by lingering inflation concerns and policy clarity from the Reserve Bank of Australia (RBA). The AUD/USD pair traded around 0.6540, benefiting from a softer US Dollar and positive technical signals.
RBA Surprises Markets With Hawkish Hold
The RBA’s unexpected decision to keep the Official Cash Rate (OCR) unchanged at 3.85% earlier this week fueled strength in the Australian Dollar. Governor Michele Bullock reaffirmed that inflation risks remain elevated, citing rising unit labor costs and poor productivity as key drivers of persistent price pressures. Deputy Governor Andrew Hauser also warned of ongoing global economic uncertainty, with tariffs posing significant risks to growth.
Despite the RBA’s cautious tone, a recent Reuters poll suggested that a rate cut could still be on the horizon. Market participants are pricing in a possible 25 basis point reduction to 3.60% in August, with Australia’s four major banks—ANZ, CBA, NAB, and Westpac—echoing this forecast.
Weaker US Dollar Supports AUD Strength
The US Dollar Index (DXY) extended its pullback for a second session, slipping to around 97.30 amid escalating trade tensions and tariff-related uncertainty. Market attention remains on the upcoming US Weekly Jobless Claims data and commentary from Federal Reserve officials for short-term cues.
President Donald Trump’s latest tariff offensive has added volatility to the global market landscape. A wave of new tariff letters was sent to eight trading partners, with threats of steep sector-specific duties. Notably, a 50% tariff on copper imports is scheduled to take effect on August 1. Trump also warned of potential 200% tariffs on pharmaceutical imports and imposed fresh levies on countries including Japan, South Korea, Malaysia, Indonesia, and several African and Southeast Asian nations.
Additionally, Trump declared via social media that any nation aligning with BRICS would face an extra 10% tariff with “no exceptions,” adding to the uncertainty in global trade relations.
China Data and Trade Routes Add Complexity
As Australia’s largest trading partner, China’s economic health directly impacts the AUD. China’s Consumer Price Index (CPI) rose 0.1% YoY in June—slightly above expectations—while the Producer Price Index (PPI) declined by 3.6%, a steeper fall than forecast. The data reflects ongoing deflationary pressure in China’s industrial sector.
Meanwhile, reports from the Financial Times suggest China is increasingly rerouting exports through Southeast Asia to sidestep US tariffs. Direct shipments to the US dropped 43% in May, while exports to Southeast Asia surged by 15%. In response, the US has now imposed a 40% tariff on goods transshipped through Vietnam.
Technical Outlook: AUD/USD Sustains Bullish Momentum
Technically, AUD/USD remains in a bullish trajectory, trading slightly above the nine-day Exponential Moving Average (EMA) near 0.6540. The pair also holds above the 14-day Relative Strength Index (RSI) midpoint, reflecting solid upside momentum.
Immediate resistance lies at the July 1 high of 0.6590. A decisive break above this level could extend the rally toward the upper boundary of the ascending channel near 0.6680.
On the downside, support is seen at the nine-day EMA (0.6538), followed by the ascending channel’s lower boundary at 0.6510. A further drop could expose the 50-day EMA at 0.6478, signaling a potential shift in short-term sentiment.
