The Australian Dollar (AUD) came under renewed selling pressure on Tuesday, reversing its prior gains as the US Dollar (USD) retained strength ahead of the closely watched JOLTS Job Openings report.
The AUD/USD currency pair remained under pressure following the release of the Reserve Bank of Australia (RBA) Meeting Minutes from May, disappointing Chinese economic data, and a persistent global risk-off sentiment fueled by renewed US tariff threats and rising stagflation fears. Vestronmix’s expert brokers explain this topic in detail throughout the article.
RBA Minutes Signal Cautious Policy Outlook
The latest RBA Meeting Minutes released on Tuesday signaled that policymakers prefer to maintain a cautious and predictable approach to monetary policy. While the central bank acknowledged arguments for a 25 basis point rate cut, the board stopped short of signaling urgency for deeper cuts such as 50 bps.
Policymakers expressed concern about the negative spillovers from US trade policy, particularly the US President’s proposed tariff increases, but noted that the domestic economy had not yet felt a substantial impact.
RBA Assistant Governor Sarah Hunter added to the cautious tone, warning that heightened global economic uncertainty, particularly from US-China trade tensions, may weigh on investment, output, and employment in Australia.
Nevertheless, she emphasized that Australian exporters remain resilient, expecting Chinese fiscal stimulus to provide a partial offset to falling external demand.
Chinese Data Disappoints, Weighing on the Aussie
Fresh economic signals from China, Australia’s largest trading partner, further dampened investor sentiment toward the Australian Dollar. The Caixin Manufacturing Purchasing Managers’ Index (PMI) fell sharply to 48.3 in May from 50.4 in April, indicating contraction and missing market expectations of a 50.6 print.
This weakness contrasted with the official NBS Manufacturing PMI, which showed a modest rise to 49.5, though still in contraction territory.
Meanwhile, the Non-Manufacturing PMI also edged down to 50.3, below forecasts. These figures raised alarms about China’s manufacturing slowdown and deteriorating service sector performance, both of which have deep implications for Australian exports of commodities and services.
US Dollar Firm Despite Economic Headwinds
The US Dollar Index (DXY) rose to 98.80, rebounding from recent losses despite continued concerns about stagflation, a combination of sluggish economic growth and persistent inflation. This rebound comes as markets brace for the upcoming JOLTS Job Openings data, which could offer clues into the resilience of the US labor market.
Economic indicators have recently disappointed. The ISM Manufacturing PMI slipped to 48.5 in May from 48.7, marking further weakness in the US industrial sector. Yet, the Greenback remains supported by a hawkish fiscal outlook, rising bond yields, and renewed geopolitical tensions.
Australia’s Domestic Indicators Signal Labor Market Weakness
Australian domestic data failed to provide support for the AUD. ANZ Job Advertisements fell by 1.2% in May, marking the second straight month of decline. The drop follows a revised 0.3% decrease in April, underscoring weakening labor demand.
Additionally, the S&P Global Manufacturing PMI slid to 51.0 in May from 51.7, its lowest level since February. These figures reinforce the RBA’s dovish bias, with Governor Michele Bullock reiterating that the central bank stands ready to implement further interest rate cuts should the outlook deteriorate further, especially amid intensifying US-China trade barriers.
Technical Outlook: AUD/USD Nears Key Support
Technically, AUD/USD is trading near 0.6468, holding slightly above the nine-day Exponential Moving Average (EMA) at 0.6456. The pair maintains a bullish bias as long as it stays within the ascending channel on the daily chart, supported by the 14-day Relative Strength Index (RSI) holding above the neutral 50 level.
Key resistance is located at 0.6537, the seven-month high recorded on May 26. A breakout above this level would open the door to 0.6660, near the upper boundary of the ascending channel. On the downside, a break below the 0.6450-0.6456 support zone could lead to a retest of the 50-day EMA near 0.6393, potentially erasing recent gains.
Outlook Hinges on JOLTS Data and US Tariff Fallout
The immediate trajectory for AUD/USD hinges on the upcoming JOLTS Job Openings data. A stronger-than-expected report could bolster the US Dollar, pushing the pair below key support levels. Conversely, weaker data may revive risk appetite, particularly if paired with dovish commentary from US policymakers.
Meanwhile, escalating US-China trade tensions, fresh tariff threats, and persistent economic uncertainty are likely to weigh on the Australian Dollar. Unless Chinese data improves or global risk sentiment rebounds, the AUD may continue to underperform against the resilient USD.
Conclusion
In summary, the Australian Dollar’s decline on Tuesday reflects a confluence of domestic caution, Chinese weakness, and US Dollar resilience. With global monetary and fiscal dynamics in flux, currency markets are likely to remain highly sensitive to fresh economic data and policy signals.
Traders should closely monitor the JOLTS release, as well as further developments in the US-China trade dispute, which remain central to the near-term direction for AUD/USD.
