AUD/USD Testing Key Support Levels Amid Economic Concerns

Critical Price Levels: AUD/USD at 0.6600, Support at 0.6557

On Tuesday, the AUD/USD pair tested the pivotal 0.6600 level, indicating a critical juncture for the currency pair. Immediate support levels to monitor closely include 0.6574 and 0.6557, while resistance is evident at 0.6615, 0.6698, and 0.6709. These levels are crucial for traders navigating the volatile landscape shaped by impending economic data and policy decisions.

Several significant events are influencing the AUD/USD dynamics. On June 12, the release of US inflation figures alongside the Federal Reserve’s interest rate decision will be in sharp focus. Concurrently, China’s Consumer Price Index (CPI) and Producer Prices will be published. Therefore providing essential insights into the health of the Chinese economy, a key driver for the AUD. Previously, the AUD/USD peaked at 0.6714 on May 16. Meanwhile, on April 19, 2024, it hit a low of 0.6362, underscoring the currency pair’s volatility. The Monthly CPI Indicator for Australia also increased to 3.6% in April, signalling persistent inflationary pressures.

US and China Data Shaping AUD/USD Outlook

Heightened caution and European political concerns have partly attributed to the US Dollar’s rebound. In parallel, China’s forthcoming CPI and Producer Prices data are highly anticipated. Especially given the recent declines in copper and iron ore prices, which have exerted downward pressure on the Aussie Dollar.

Meanwhile, the Reserve Bank of Australia (RBA) is weighing potential interest rate hikes should inflation continue to rise, a factor that will also play into the AUD’s performance. Money markets currently anticipate around 25 basis points of easing by July 2025. Thereby highlighting the market’s expectations for the RBA’s policy trajectory.

Bearish Technical Signals for AUD/USD Below 0.6539

From a technical perspective, the short-term outlook for the AUD/USD remains bearish, with the potential for further declines towards the 200-day Simple Moving Average (SMA) of 0.6539. The low for May was marked at 0.6465, and support levels from the 50-day and 200-day Exponential Moving Averages (EMAs) provide some bullish signals. The Relative Strength Index (RSI) hovers around 40 on the 4-hour chart, indicating potential for further downside before reaching oversold conditions.

China’s Inflation Data Expected to Influence AUD/USD

Focusing on China, the forecast for May predicts that producer prices will fall by 1.8% year-on-year while consumer prices will increase by 0.3% year-on-year. The forecast predicts that consumer prices will decline by 0.2% on a month-to-month basis. In April, producer prices had already declined by 2.5% year-on-year, with consumer prices rising by 0.3% year-on-year, reflecting ongoing deflationary pressures in the industrial sector and mild inflation in consumer goods.

US CPI Report, Fed Decision Critical for AUD/USD

The US economic calendar for June 12 is packed with significant events, including the US CPI report and the FOMC interest rate decision. The forecast for May indicates an annual inflation rate of 3.4% in the US, with core inflation expected to soften slightly from 3.6% to 3.5%. Market expectations suggest that the Federal Reserve will maintain its current stance in June, with attention focused on economic projections and the subsequent press conference for further clues on future policy directions.

AUD/USD Forecast: Volatility Expected Amid Inflation Data

In the short term, the AUD/USD forecast hinges heavily on US inflation numbers and the FOMC’s economic projections. Higher-than-expected inflation figures coupled with hawkish economic projections could bolster the US Dollar, exerting additional pressure on the AUD. The AUD/USD pair is trading above its 50-day and 200-day EMAs, indicating bullish signals. Resistance levels at $0.67003 and $0.67500 are critical, while an RSI of 48.35 suggests the pair could drop below $0.65500 before entering oversold territory, pointing to further potential volatility ahead.