AUD/USD Rally Extends as Market Bets Against U.S. Economy and Embraces Risk

Economic

Summary:

The Australian Dollar has rebounded to weekly highs past 0.6500, buoyed by a weakening U.S. Dollar and rising global trade tensions, despite soft domestic GDP data and a dovish Reserve Bank of Australia.

BUY AUDUSD

Close Time

CLOSED

0.65349

Entry Price

0.69000

0.64500

0.66521 +0.00001 +0.00%

31.5

Pips

Loss

0.64500

0.65034

Exit Price

0.65349

Entry Price

0.69000

The Australian Dollar extended its rally for a second consecutive session on Thursday, breaking decisively above the 0.6500 level and marking a strong recovery from earlier losses this week. This move higher is largely being powered by a combination of U.S. Dollar weakness and growing market anxiety over trade policy under the looming specter of renewed tariffs. Investors appear increasingly willing to look past weaker-than-expected domestic growth data from Australia and the dovish messaging from the Reserve Bank of Australia, instead focusing on deteriorating sentiment around the U.S. economy.

Much of the recent momentum in the Aussie stems not from strength at home, but from the growing cracks in the U.S. economic outlook. On Wednesday, the Institute for Supply Management’s Services PMI revealed a surprise contraction, falling below the crucial 50-mark that indicates whether activity is expanding or shrinking. This was compounded by a weaker-than-anticipated reading from the ADP private payrolls report, which showed that hiring in the private sector slowed last month. These disappointing numbers have cast a shadow over Friday’s upcoming Non-Farm Payrolls report and reignited speculation that the U.S. economy may be inching toward a recession.

At the same time, trade tensions have surged back to the forefront. Former President Donald Trump, who remains an influential figure on economic policy expectations, declared that ongoing negotiations with Chinese Premier Xi Jinping have been "extremely hard," citing a lack of meaningful progress. Markets reacted nervously to the announcement that tariffs on steel and aluminum imports would double to 50% from 25%, stoking fears of a broader protectionist pivot. Ironically, this uncertainty is hurting the U.S. Dollar more than traditionally risk-sensitive currencies like the Aussie, which is defying its usual behavior under such conditions.

Despite a weak set of domestic data released earlier in the week, the Australian Dollar has held its ground. Australia’s first-quarter GDP rose just 0.2%, missing consensus forecasts of 0.4% and marking a notable slowdown from the 0.6% pace seen in the previous quarter. The disappointing growth figures suggest that the Australian economy is struggling under the weight of soft household spending, stagnant wage growth, and slowing business investment. Ordinarily, such data might have weighed more heavily on the currency, but current global dynamics appear to be overriding local fundamentals.

The dovish tone from the Reserve Bank of Australia adds another layer of complexity. Minutes from the central bank’s most recent policy meeting revealed that a 50 basis point rate cut was actively considered. Policymakers also signaled their readiness to implement further reductions if global trade conditions deteriorate due to escalating tariffs. While such a stance might normally pressure the Australian Dollar, the broader flight from U.S. assets is providing a supportive backdrop.

Technical Analysis

On the technical front, the price action in AUD/USD is encouraging for bulls. The pair has broken above a key resistance zone around 0.6550, signaling the potential for a broader breakout. The Relative Strength Index is showing bullish momentum, even as it edges into overbought territory, suggesting that strong buying interest remains in play. Additionally, the pair continues to trade above its 50-day Exponential Moving Average, which reinforces the view that the short-term trend remains upward. The Aussie is currently navigating a minor ascending channel that has kept price action relatively stable while guiding it higher.

We are now closely watching the next major resistance levels, with the first significant upside target emerging near the 0.6680 area, a zone that previously acted as a strong barrier. A sustained break above that could pave the way for an eventual test of the 0.6900 region, a level not seen since late last year. These milestones, however, are contingent on a continued softening of U.S. data and a lack of hawkish surprises from the Federal Reserve or other major central banks.

TRADE RECOMMENDATION

BUY AUDUSD

ENTRY PRICE: 0.6535

STOP LOSS: 0.6450

TAKE PROFIT: 0.6900

Risk Warnings and Disclaimers

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Add to Favorites

Eva Chen

Economic

Commodity

Summary:

The Institute for Supply Management (ISM) has indicated that the US service sector business activity has contracted for the first time in nearly a year. Meanwhile, according to the ADP National Employment Report, private sector hiring in the US saw a significant slowdown in May. The cooling US economy could lead to an early rate cut by the Federal Reserve, which is bullish for gold.

BUY XAUUSD

Close Time

CLOSED

3381.06

Entry Price

3500.00

3300.00

4328.20 +28.81 +0.67%

810.6

Pips

Loss

3300.00

3299.83

Exit Price

3381.06

Entry Price

3500.00

Fundamentals

Gold prices surged past $3,390 on Thursday as concerns over the US economic slowdown intensified, bolstering demand for non-yielding safe-haven assets and driving the strength in gold prices.

The ISM's report released on Wednesday revealed that the US service sector contracted for the first time in nearly a year, signaling a worrying sign of overall economic weakness.

Moreover, the ADP employment report showed a marked slowdown in private sector hiring, with only 37,000 jobs added in May, significantly below the expected 111,000 and also lower than the 60,000 added in April.

Nela Richardson, Chief Economist at ADP, acknowledged the hiring slowdown but noted that wage pressures have not yet significantly eased, indicating that while the overall momentum has weakened, certain parts of the labor market remain tight.

These weak indicators have reinforced expectations that the Federal Reserve will cut rates at least twice this year. This outlook is typically bullish for gold, as the precious metal becomes more attractive in a low-interest-rate environment.

Despite repeated calls for rate cuts by former President Trump, Federal Reserve officials have remained cautious, especially amid ongoing trade risks and a volatile global landscape.

Currently, attention is turning to the US non-farm payrolls report due out on Friday. If the report continues to fall short of market expectations, it could further clarify the Federal Reserve's policy path. (Bullish for gold)

Deteriorating US Economic Outlook Boosts Gold Prices Further_1

Technical Analysis

Since hitting a low on May 15, gold prices have been on a strong upward trend, forming a series of higher highs, signaling potential for further gains.

From a technical standpoint, gold prices are in an upward trend, having broken above this week's high of $3,392 during trading hours. The Relative Strength Index (RSI) indicates that buying pressure is dominant.

Given the clear daily upward trend, gold prices are expected to rise to the next resistance level at $3,415. Moreover, based on the continuation of the head-and-shoulders bottom pattern, a break above this level appears inevitable. The next resistance level is at $3,440.

Trading Recommendations

Trading Direction: Long

Entry Price: 3374

Target Price: 3500

Stop Loss: 3300

Valid Until: June 20, 2025, 23:55:00

Support: 3385/3361/3343

Resistance: 3415/3340/3480

Risk Warnings and Disclaimers

Add to Favorites

Eva Chen

Central Bank

Forex

Summary:

The Bank of Canada (BoC) has kept its key interest rate unchanged, primarily focusing on inflation risks. A potential rate cut in the future cannot be ruled out.

SELL USDCAD

Close Time

CLOSED

1.36582

Entry Price

1.34000

1.39100

1.37628 -0.00072 -0.05%

81.7

Pips

Loss

1.34000

1.37399

Exit Price

1.36582

Entry Price

1.39100