AUD Rebounds, But Dovish Risks Still Dominate

Key Takeaways:
*The RBA’s surprise decision to hold at 3.85% triggered a short-term AUD rebound, but markets remain firmly positioned for an August cut, with an 85% probability priced and terminal rates seen at 3.0%.

*Trump’s 50% copper tariff targets a key Australian export, deepening AUD’s vulnerability to global trade fragmentation. External demand risks now cap any sustained upside.

Market Summary:

TThe U.S. dollar gained ground in the last session, with the Dollar Index climbing to 97.84—its highest The Australian dollar staged a notable rebound this week, climbing 0.8% after the Reserve Bank of Australia (RBA) unexpectedly held rates steady at 3.85%. The market reaction was swift, with traders interpreting the decision as a tactical pause rather than a directional shift. Governor Bullock emphasized that the board remains data-dependent, and the split 6-3 vote underlines internal divisions on the timing of future easing.

Still, markets are not buying into sustained hawkishness. An 85% probability of an August rate cut is already priced in, and terminal rate expectations have dropped to 3.0%. The cautious tone from RBA officials suggests that the easing cycle has merely been delayed, not derailed. Weak Q1 GDP growth at 1.3% and rising concerns about China’s economic deceleration only reinforce that dovish tilt.

On the external front, rising tariff risks threaten to undermine Australia’s commodity-centric growth model. Trump’s newly announced 50% tariff on copper—a key Australian export—has thrown a spotlight on the AUD’s vulnerability to geopolitical friction and demand-side headwinds. While the RBA’s Deputy Governor Hauser has signaled a pivot toward global research partnerships, the message is clear: Australia is bracing for a more fragmented global trade order.

AUD/JPY’s recent advance toward the 95.75 level reflects carry-driven flows and relative policy divergence, not a clean bill of economic health. The outlook for the Aussie remains capped by structural challenges—soft domestic data, heightened China exposure, and a looming shift toward policy accommodation.

Near-term direction will hinge on inflation releases and the evolution of global trade disputes. Until clarity emerges, the Australian dollar may continue to find short-lived strength on tactical surprises, but the underlying trend still leans toward softness amid a complicated global macro backdrop.

Technical Analysis

AUDUSD, H4

AUD/USD struggles to find momentum, hovering near 0.6530 as price action stalls below channel resistance. The pair remains confined within a modest ascending channel, with bullish momentum lacking conviction amid mixed macro signals and fading commodity strength. Traders appear cautious, awaiting clearer direction from upcoming inflation data and global trade developments.

Technically, the Relative Strength Index (RSI) is holding just below the neutral 50 mark at 48, underscoring a lack of strong directional bias. While the indicator has rebounded from oversold territory, it has yet to reclaim bullish ground, reflecting uncertainty rather than strength.

The MACD remains indecisive. A recent bearish crossover, though shallow, has flattened near the zero line, with both the MACD and signal lines lacking momentum. This suggests a market in wait-and-see mode, with no clear impetus for either bulls or bears.

Until AUD/USD breaks decisively above the 0.6530 resistance zone or falls below key channel support near 0.6600, the pair may continue to drift sideways. Broader macro themes that such as China-related trade risks, RBA rate expectations, and U.S. dollar dynamics are likely to drive the next significant move.

Resistance Levels: 0.6530, 0.6600
Support Levels: 0.6450, 0.6415