Daily Price Outlook
During the European trading session, the AUD/USD currency pair has pulled back from a five-month high of 0.6493, slipping to around 0.6450 level. However, this decline comes as the US dollar strengthens ahead of the Federal Reserve’s (Fed) anticipated monetary policy decision on Wednesday.
Although a pause in interest rate hikes is expected, market attention remains on Fed Chair Jerome Powell’s remarks, especially amid uncertainties surrounding trade negotiations and President Donald Trump's calls for rate cuts.
US Dollar Strengthens Amid Fed Uncertainty and Trade Negotiation Hopes
Investor sentiment surrounding the dollar has remained strong in anticipation of the Fed's upcoming policy meeting, where it is widely expected to hold rates steady.
However, market participants are focused on Powell’s comments, particularly in light of ongoing tariff-related uncertainties.
President Trump is pushing for aggressive rate cuts, urging the Fed to change policies. Treasury Secretary Scott Bessent hinted that trade deals with other countries are close, but Trump ruled out talks with China's President Xi this week. China's Commerce Ministry is reviewing US trade proposals.
On the data front, the US ISM Services PMI showed a rise to 51.6 in April, beating expectations of 50.6.
This increase is reflective of stronger demand, with the New Orders Index climbing to 52.3, signaling optimism about economic activity despite looming trade risks.
Australia Faces Rate Cut Expectations Amid Economic Recovery Signals
On the Australian front, the Australian Dollar (AUD) has gained support after Prime Minister Anthony Albanese won a second term in the 2025 Federal Election.
His victory promises a government focused on addressing cost-of-living issues, investing in renewable energy, and implementing tax cuts and healthcare reforms.
These policies are expected to aid economic recovery. However, pressure is still on the Reserve Bank of Australia (RBA) to consider rate cuts.
Meanwhile, Westpac’s CEO believes that the worst of consumer and business stress is over, supporting optimism about Australia’s economic outlook.
However, the National Australia Bank (NAB) forecasts a 50 basis point rate cut by the RBA in May, which could put downward pressure on the AUD.
AUD/USD – Technical Analysis
AUD/USD is trading just above its ascending trendline support at $0.64436, attempting to hold its recent bullish structure after forming a series of higher lows throughout early May.
The pair surged from the $0.63737 low, forming a minor ascending channel, and recently printed a bearish engulfing candle after stalling below resistance at $0.64788.
Despite that rejection, price remains supported by both the trendline and the 50-period EMA at $0.64569, with bulls defending this confluence area aggressively.
From a candlestick perspective, the current pause is characterized by a spinning top and long wicks to both sides, suggesting indecision. The RSI, currently at 43.46, shows mild bearish pressure but no divergence.
A move back above the $0.64699 pivot would tilt the structure in favor of another push higher, particularly if accompanied by a bullish engulfing or a breakout candle with volume confirmation.
Should AUD/USD hold above the $0.64436 area and break above the $0.64788 ceiling, the next major resistance lies at $0.64933, followed by $0.65151. Conversely, a break below $0.64436 would expose the pair to downside risks toward $0.64234 and $0.64193.
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