The Australian Dollar (AUD) has seen a mixed performance this week, paring back some of its recent gains even as the US Dollar (USD) struggles amid dovish economic signals. Despite the USD’s softness, the AUD/USD pair remains volatile ahead of key US economic data, with traders carefully monitoring global trade developments, Australian employment data, and central bank outlooks to gauge the pair’s next move.
NordaLueur brokers explore the complexities of this subject in a well-researched article.
Strong Australian Employment Data Bolsters AUD
The latest Employment Change report from the Australian Bureau of Statistics (ABS) provided a strong upside surprise, with 89,000 jobs added in April, far exceeding the market forecast of 20,000. This marked a significant improvement over the 36,400 jobs created in March. Meanwhile, the Unemployment Rate held steady at 4.1%, indicating a resilient labor market.
Such robust figures have boosted confidence in Australia’s economic fundamentals, helping to anchor the AUD even as it struggles to extend recent gains. Furthermore, the Wage Price Index rose 3.4% year-over-year in Q1 2025, above expectations of 3.2%, signaling sustained wage growth. This is crucial for domestic inflationary pressures and future monetary policy decisions by the Reserve Bank of Australia (RBA).
AUD Benefits from Improved Global Risk Sentiment
The Australian Dollar—often seen as a risk-sensitive currency—has drawn support from easing global trade tensions, which have lifted overall market sentiment. Over the weekend, the US and China reached a preliminary trade agreement in Switzerland to roll back tariffs. The deal includes a reduction of US tariffs on Chinese goods from 145% to 30% and Chinese tariffs on US imports from 125% to 10%.
This agreement represents a major step toward resolving trade hostilities that have weighed on global economic growth since 2018. As optimism spreads, risk appetite has increased across global markets, helping the AUD recover some ground despite broader FX volatility.
Fed Rate Cut Expectations Shift Amid Mixed US Data
Despite a weaker USD, sentiment remains cautious due to shifting expectations regarding the Federal Reserve’s policy stance. The US Dollar Index (DXY) is trading near 100.90, reflecting broader market uncertainty.
Recent US inflation data showed that the Consumer Price Index (CPI) rose 2.3% YoY in April, slightly below the 2.4% expected and the 2.4% gain in March. Meanwhile, Core CPI remained unchanged at 2.8% YoY, aligning with forecasts. Monthly, both headline and core CPI increased by 0.2%.
These readings have moderated expectations for aggressive rate cuts. According to LSEG data, the probability of a 25-basis-point rate cut in September has dropped to 74%, down from earlier forecasts that anticipated a cut as soon as July.
Still, signs of disinflationary momentum persist, keeping markets sensitive to upcoming indicators such as US Retail Sales and Producer Price Index (PPI) data. These reports are expected to shape short-term sentiment for both the USD and AUD/USD pair.
Chinese Inflation Weakens, Adds Pressure to Global Growth Outlook
In contrast, China’s inflation data continues to reflect a deflationary trend, raising concerns over domestic demand in the world’s second-largest economy. The Consumer Price Index (CPI) in China fell 0.1% YoY in April, the third straight monthly decline, matching forecasts. The Producer Price Index (PPI) contracted 2.7%, deeper than the 2.5% drop in March.
Weakness in Chinese inflation data could weigh on Australia’s commodity exports, given the close trade relationship between the two nations. This remains a downside risk for the AUD, especially if global demand weakens further in the coming months.
Technical Outlook: AUD/USD Near Short-Term Resistance
From a technical analysis perspective, the AUD/USD pair is trading around 0.6440, slightly rebounding after a 0.50% loss earlier in the week. The price is currently holding above the nine-day Exponential Moving Average (EMA) at 0.6429, signaling a mild bullish bias.
The 14-day Relative Strength Index (RSI) remains above 50, suggesting positive momentum. A sustained move beyond the resistance level at 0.6515, last seen in December 2024, could open the door to a rally toward the seven-month high of 0.6687.
Key support levels lie at the nine-day EMA (0.6429) and the 50-day EMA (0.6355). A break below these could shift the outlook toward a bearish trajectory, with potential downside toward the March 2020 low of 0.5914.
Conclusion
Although the Australian Dollar has trimmed some of its recent gains, underlying strength in employment, wage growth, and improving global trade sentiment may continue to provide a floor under the AUD. Meanwhile, US economic data and Fed policy outlook remain pivotal in shaping the next directional move for AUD/USD.
With key economic reports due and geopolitical developments unfolding, traders should brace for short-term volatility. However, the longer-term bias for the AUD may tilt higher if risk appetite remains intact and China’s demand environment stabilizes.
