Daily Price Outlook
During Thursday’s European trading session, the AUD/USD currency pair bounced back modestly, edging higher toward the 0.6450 mark after experiencing a sharp decline of over 1% in the previous session.
The rebound comes after renewed optimism surrounding US-China trade relations. In contrast to this, the modest strength in the US dollar was seen as a key factor that limits gains in the AUD/USD pair.
Fed’s Wait-and-See Approach Adds Pressure on USD but Limits AUD/USD Recovery
As widely anticipated, the Federal Reserve kept interest rates unchanged at 4.25%–4.50%, but the tone of its statement introduced renewed uncertainty. The Fed cited increased risks to both inflation and employment and emphasized a continued data-dependent approach.
Fed Chair Jerome Powell’s remarks during the press conference added to the cautious sentiment, especially when he highlighted that persistent trade tariffs could obstruct the Fed’s inflation and employment objectives well into 2025.
These comments raised concerns about policy instability and hinted that the Fed may delay future rate adjustments, pushing the US Dollar higher and capping the AUD/USD rebound.
AUD/USD Finds Support on US-China Trade Talks and China’s Economic Stimulus Plans
Despite the broader US Dollar strength, the Australian Dollar found support amid renewed optimism surrounding US-China trade relations.
Although, the upcoming high-level talks in Geneva between US Treasury Secretary Scott Bessent, Trade Representative Jamieson Greer, and Chinese Vice Premier He Lifeng are seen as a potential turning point in the prolonged trade conflict.
Further supporting the Australian Dollar is China’s recent announcement to cut key lending rates and reduce bank reserve requirements to stimulate growth.
These efforts by the People’s Bank of China aim to stabilize the economy and improve demand for Australian exports, particularly in the commodity sector.
RBA Rate Cut Speculation Grows Despite Ai Group Index Improvement
On the domestic front, market participants continue to price in a potential 25-basis-point interest rate cut by the Reserve Bank of Australia (RBA), which would lower the cash rate to 3.85%. This expectation persists despite a slight improvement in the Ai Group Industry Index for April.
The index, however, still marked its 33rd consecutive month of contraction, especially in export-reliant manufacturing sectors, underscoring persistent economic softness. This reinforces the belief that the RBA may act to support growth, even as external conditions gradually improve.
AUD/USD – Technical Analysis
The AUD/USD pair is currently trading around $0.64122, breaking below a critical ascending trendline that had supported the recent bullish structure. This trendline breach, combined with the drop below the 50-hour simple moving average (SMA) at $0.64670, indicates a potential bearish reversal.
The price action has formed a clear bearish engulfing candle, confirming the downward momentum, while the RSI is hovering near 36.73, signaling increasing bearish pressure but not yet oversold.
The break below the ascending trendline and 50-hour SMA signals a potential bearish continuation, with a possible sell entry below $0.64211, targeting the $0.63855 support. A protective stop-loss above $0.64436 helps manage risk in case of a bullish rebound.
Traders should watch for a potential three black crows pattern, signaling continued bearish dominance if the next few candles close lower.
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