Australian Dollar erases daily gains as US Dollar strengthens amid easing US-China tensions

The Australian Dollar (AUD) edged lower against the US Dollar (USD) on Tuesday, trimming earlier gains. Despite the pullback, the AUD/USD pair found some support amid optimism that the latest US-China tariff tensions may ease. Given the close trade ties between Australia and China, any economic developments from China could significantly influence the AUD.

US and Chinese advisers are scheduled to reconvene for a second day of talks on Tuesday at 10:00 a.m. in London, according to Bloomberg. The discussions aim to reduce tensions between the world’s two largest economies, particularly regarding technology exports and rare earth elements.

In domestic data, Australia’s Westpac Consumer Confidence rose 0.5% month-over-month in June, a notable slowdown from the 2.2% increase in May. The moderation reflects persistent global trade uncertainty. Still, this marks the fourth monthly rise in 2024, supported by the Reserve Bank of Australia’s May interest rate cut and signs of easing inflation.

Australian Dollar Dips as US Dollar Gains Amid Easing Tariff Tensions

• The Australian Dollar (AUD) slipped on Tuesday as the US Dollar (USD) strengthened, supported by easing US-China tariff tensions and robust US economic data. The US Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, traded higher near 99.10 at the time of writing.
• Markets are now focused on the upcoming US Consumer Price Index (CPI) report, due Wednesday, with expectations for a 2.5% year-over-year rise in May—up from April’s 2.3% increase.
• The US Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls (NFP) rose by 139,000 in May, surpassing expectations of 130,000, though down from April’s revised 147,000 (previously 177,000). Meanwhile, the Unemployment Rate held steady at 4.2%, and Average Hourly Earnings were unchanged at 3.9%, both stronger than anticipated.
• In a social media post on Wednesday, former President Donald Trump urged Federal Reserve Chair Jerome Powell to lower interest rates, highlighting that Europe has cut rates multiple times.
• Minneapolis Fed President Neel Kashkari stated that while the labor market is showing some signs of cooling, uncertainty remains high, and the Fed should maintain a cautious, wait-and-see approach.
• On the fiscal front, House Republicans passed Trump’s “Big Beautiful Bill”—a multitrillion-dollar tax and spending package—which may significantly widen the US fiscal deficit. This development raises concerns about sustained higher bond yields and could intensify the “Sell America” trend in markets. The Senate is expected to review the bill with potential amendments before the July 4 deadline.
• In China, inflation data showed continued weakness. The Consumer Price Index (CPI) fell by 0.1% year-over-year in May, slightly better than the expected 0.2% drop. On a monthly basis, CPI slipped 0.2% versus a 0.1% gain in April. Meanwhile, the Producer Price Index (PPI) declined 3.3% YoY in May after a 2.7% fall in April. However, China’s trade surplus expanded to CNY 743.56 billion in May, driven by a 6.3% YoY rise in exports, while imports declined by 2.1%.
• Australia also released weaker-than-expected trade data. The trade surplus narrowed to AUD 5.413 billion in April, below expectations of AUD 6.1 billion. Exports fell by 2.4% MoM, following a strong 7.2% gain in March. Imports rose by 1.1%, reversing a prior decline. Additionally, China’s Caixin Services PMI rose to 51.1 in May, in line with expectations, up from 50.7 in April.

AUD/USD Holds Above 0.6500 Amid Bullish Technical Setup

Despite the broader USD strength, the AUD/USD pair is holding steady near 0.6520 on Tuesday, trading just below a seven-month high of 0.6538 reached on June 5. Technical indicators point to continued bullish momentum.

The pair remains within an ascending channel and trades above the nine-day Exponential Moving Average (EMA), signaling positive short-term momentum. The 14-day Relative Strength Index (RSI) stays above the neutral 50 level, further confirming a bullish bias.

On the upside, immediate resistance is seen at 0.6538, with further gains potentially targeting the eight-month high of 0.6687, near the channel’s upper boundary at 0.6690.

On the downside, key support lies at the nine-day EMA around 0.6489, with additional support near the channel’s lower boundary at 0.6480. A break below this zone could weaken the bullish outlook and expose the 50-day EMA support at 0.6412.