- The AUD/USD slides about 0.6415 while US data support the dollar.
- Applications for unemployment and PMI exceed expectations, reinforcing a resilient American economy.
- Trump’s tax bill revives tax concerns, limiting the general profits of the USD despite solid data.
The Australian dollar (AUD) was under renewed pressure on Thursday while the US dollar (USD) found its stability, with the appetite due to the risk fading and the wider markets inclining defensively. A strong rebound in the American dollar index (DXY) weighed on the AU, pushing the aud/USD at 0.6415, a key support level that has acted as a ground in recent sessions. At the time of writing, the pair is being negotiated around 0.6418, floating just above the minimums intradic while the sellers test the resistance of the short -term support.
The US dollar is backed by solid data, but long -term risks lurk
The Aussie setback reflects divergent policy trajectories and economic signals. Without significant Australian data published on Thursday, the feeling remains molded by the recent reduction of 25 basic points in the interest rate of the Bank of the Australian Reserve (RBA), which lowered the cash rate to 3.85%. Governor Michele Bullock has maintained a cautious tone, citing the slowdown in inflation and uncertainty in global trade.
In contrast, the US dollar found support after a series of positive data publications. The initial unemployment applications for the week that ended on May 18 were 227,000, below the consensus of 230,000, reinforcing a resilient labor market. Meanwhile, both the manufacturing PMI of the US S&P global (May, preliminary) and the PMI of Services (May, Preliminary) were printed in 52.3, comfortably above the 50 mark that separates the contraction of the expansion. The data surprised upwards, indicating an increase in the activity of both the manufacturing and services sector.
However, the feeling around the dollar remains mixed due to broader tax concerns. Investors are still digesting the “One Big Beautiful Bill” by President Donald Trump, who went through the camera earlier this week. The bill proposes to extend the 2017 tax cuts while reducing spending on key welfare programs. Although some see short -term stimulus potential, the legislation is expected to add more than 3.8 billion dollars to the federal deficit in the next decade. This has intensified concerns about the sustainability of US debt and credit quality, especially after recent qualification sales. These structural concerns are limiting the dollar’s bullish potential, even in the face of short -term positive data.
The AUD/USD stagnates under resistance, points to a break below 0.6415
Technically, the AUD/USD clings to a fragile support zone about 0.6415, with the recent price action showing a clear lack of conviction by the bullies.
The torque has not been able to break convincingly above the range of 0.6420–0.6450, which aligns both with the simple mobile average (SMA) of 20 days and with the midpoint of the fall from September to April about 0.6428.
If the sellers manage to press below 0.6415, could open the door towards the minimum of November at 0.6338, and potentially the level of 0.6307, which marks the fibonacci setback of 38.2% of the recovery from October to April.
The relative force index (RSI) is floating around 51.77, slightly above the neutral level of 50.
Aud/USD Daily Graph
Faqs Australian dollar
One of the most important factors for the Australian dollar (Aud) is the level of interest rates set by the Australian Reserve Bank (RBA). Since Australia is a country rich in resources, another key factor is the price of its greatest export, iron mineral. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and commercial balance. The feeling of the market, that is, if investors are committed to more risky assets (Risk-on) or seek safe shelters (Risk-Off), it is also a factor, being the positive risk-on for the AUD.
The Australian Reserve Bank (RBA) influences the Australian dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of the interest rates of the economy as a whole. The main objective of the RBA is to maintain a stable inflation rate of 2% -3% by adjusting the interest rates or the low. Relatively high interest rates compared to other large central banks support the AU, and the opposite for the relatively low. The RBA can also use relaxation and quantitative hardening to influence credit conditions, being the first refusal for the AU and the second positive for the AUD.
China is Australia’s largest commercial partner, so the health of the Chinese economy greatly influences the value of the Australian dollar (Aud). When the Chinese economy goes well, it buys more raw materials, goods and services in Australia, which increases the demand of the AU and makes its value upload. The opposite occurs when the Chinese economy does not grow as fast as expected. Therefore, positive or negative surprises in Chinese growth data usually have a direct impact on the Australian dollar.
Iron mineral is the largest export in Australia, with 118,000 million dollars a year according to data from 2021, China being its main destination. The price of iron ore, therefore, can be a driver of the Australian dollar. Usually, if the price of iron ore rises, the Aud also does, since the aggregate demand of the currency increases. The opposite occurs when the price of low iron ore. The highest prices of the iron mineral also tend to lead to a greater probability of a positive commercial balance for Australia, which is also positive for the AUD.
The commercial balance, which is the difference between what a country earns with its exports and what it pays for its imports, is another factor that can influence the value of the Australian dollar. If Australia produces highly requested exports, its currency will gain value exclusively for the excess demand created by foreign buyers who wish to acquire their exports to what you spend on buying imports. Therefore, a positive net trade balance strengthens the AUD, with the opposite effect if the commercial balance is negative.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
