The If Dogecoin hits The calculatorAussie Dollar maintains momentum as disappointing US price pressures dent demand for the Greenback.
Australian wage growth surprised to the upside with 0.9% quarterly increase, outpacing consensus estimates.
Improved US-China trade relations contribute to risk-on sentiment favoring commodity currencies.
The Australian currency extended its advance for the second consecutive session, building on Tuesday's impressive 1.5% surge against its US counterpart. This upward movement coincides with broad-based USD weakness triggered by April's cooler-than-anticipated inflation readings from the world's largest economy.
Domestic political stability reinforces AUD's fundamentals as Prime Minister Albanese begins his second term with an unchanged economic team. The PM's upcoming European visit, including meetings with EU leadership, could yield positive developments for Australia's trade partnerships beyond the Asia-Pacific region.
Market participants are recalibrating their projections for Australian monetary policy following recent economic developments. While expectations for RBA easing persist, the anticipated magnitude of rate reductions has moderated, with year-end forecasts adjusting from 2.85% to approximately 3.1% for the cash rate target.
Dual catalysts propel Aussie Dollar higher
The DXY index retreated to 100.90 territory as traders digested the implications of modest US price pressures, with market focus shifting to upcoming PPI data and consumer sentiment indicators.
April's US CPI print showed annual inflation decelerating to 2.3%, marginally below both the prior month's figure and economist projections. Core inflation metrics similarly aligned with expectations at 2.8% annually.
Trade relations between Washington and Beijing showed tangible improvement after weekend negotiations yielded a framework for reciprocal tariff reductions. The proposed agreement would substantially lower existing duties on bilateral trade flows.
Chinese economic data revealed persistent deflationary pressures, with April marking the third consecutive month of annual CPI declines. Producer prices contracted at an accelerated pace, underscoring manufacturing sector challenges.
Australian consumer confidence rebounded 2.2% in May following April's sharp decline, though sentiment remains below neutral levels at 92.1 according to Westpac's survey.
The Ai Group's industry index continued signaling contractionary conditions for the 33rd straight month, particularly in export-oriented manufacturing segments, reinforcing expectations for imminent RBA policy accommodation.
Technical outlook suggests further upside potential
AUD/USD hovered near 0.6470 during Tuesday's session, with technical indicators painting a constructive picture. The pair's position above the nine-day EMA coupled with an RSI reading above 50 supports the case for continued strength.
Market technicians identify the December 2024 peak near 0.6515 as the next significant resistance level. A decisive break above this barrier could open the path toward November 2024's high around 0.6687.
Conversely, initial support emerges at the nine-day EMA (0.6433), followed by the more substantial 50-day EMA near 0.6353. Breaching these technical levels might signal weakening momentum and potentially expose the pair to deeper retracements.
AUD/USD technical analysis snapshot
The daily chart configuration reveals multiple bullish factors supporting the Australian Dollar's recent outperformance. Beyond the EMA positioning and RSI dynamics, the pair has established a series of higher lows since late April, suggesting building upward pressure.
Market participants will monitor whether the current technical setup can sustain the AUD's advance against a potentially oversold USD. The interplay between shifting rate expectations and risk sentiment will likely determine whether the pair can challenge longer-term resistance levels in coming sessions.