AUD/USD posts small gains above 0.6500 amid weaker US Dollar

AUD/USD grinds higher above 0.6500 in Asian trading on Thursday. The RBA's hawkish on-hold rate decision earlier this week acts as a tailwind for the pair. Meanwhile, lingering trade concerns undermine the US Dollar, lending further support to the major. 

AUD/USD Technical Overview

Resistance is seen at the 2025 ceiling of 0.6590 (June 30), followed by the November 2024 high at 0.6687 (November 7) and the key psychological level of 0.7000.

Initial support sits at the 200-day SMA at 0.6409, ahead of the June trough at 0.6372 (June 23) and the May low at 0.6356 (May 12). A break below that zone could expose the 0.6000 level and the 2025 bottom at 0.5913 (April 9).

Momentum signals are mixed: the Relative Strength Index (RSI) above 53 suggests a potential recovery, while an Average Directional Index (ADX) reading near 18 is indicative that the strength of the trend might be subsiding.

Medium-term outlook

In the near term, AUD/USD may remain range-bound unless a major shift emerges in China’s policy stance or US trade dynamics.

With the RBA likely to proceed cautiously and China’s recovery still uneven, the Australian Dollar could struggle to break above key resistance levels in the weeks ahead.

Fundamental Overview

The Australian Dollar (AUD) added to its recent rebound against the US Dollar (USD) on Wednesday, with AUD/USD revisiting the 0.6550 region amid a humble daily uptick.

RBA holds firm but signals easing bias

The Reserve Bank of Australia’s (RBA) unexpected decision to keep the Official Cash Rate (OCR) unchanged at 3.85% on Tuesday defied widespread expectations of a 25-basis-points cut.

Indeed, the central bank revealed that its policy decision was split, with six board members voting to hold and three favouring a reduction. Governor Michele Bullock clarified that this divide reflected differences over timing, not direction, and reiterated that the board remained inclined toward an easing path, provided inflation data for the April-June period came in broadly as forecast.

Markets quickly adjusted to the RBA’s tone, assigning nearly a 90% chance of a quarter-point cut at the August 12 meeting and revising the expected terminal rate from 2.85% to 3.10%.

On Wednesday, Deputy Governor Andrew Hauser remarked that Australia's central bank is highly attentive to developments regarding US tariffs, noting that there exists a significant level of uncertainty in the global economy. Hauser remarked that the impact of the tariff on Australia is still in its early stages, noting that the sentiment among businesses and households has not significantly deteriorated, unlike the sentiment observed in the United States and Europe.

Mixed signals from China

Meanwhile, recent data from China offered a mixed picture. May figures showed improvements in industrial output, retail sales, and services activity, while official PMI readings hovered near the expansion threshold. These developments support projections of around 5% GDP growth this year.

However, potential headwinds for Australia's commodity-sensitive economy included ongoing weakness in the property sector and a gradual withdrawal of stimulus.

In addition, the disinflationary pressure remained well in place in the country after the Consumer Price Index (CPI) rose marginally by 0.1% in the year to June (from -0.1% YoY).

Coincident central bank views?

The Federal Reserve (Fed) decided to keep rates unchanged in June, while the RBA shocked markets by delivering a cautious hold in spite of a consensus on the trajectory of monetary policy. In the event that inflation makes a significant turnaround, Fed Chair Jerome Powell cautioned that US tariffs might rekindle goods inflation, perhaps leading to a split in central bank outlooks.

Speculative positioning eases

CFTC data through July 1 showed non-commercial net shorts in AUD falling to just over 70K contracts, a two-week low, while open interest climbed for a third consecutive week to around 151.4K contracts, suggesting a modest easing in bearish sentiment.