The Australian dollar slipped slightly against the US dollar on Tuesday, backing away from a four-week high near 0.7100 after a sharp rally on Monday. The move came as the US currency steadied near its weakest levels since early March, with losses limited by improving risk appetite and a firm policy stance from the Reserve Bank of Australia (RBA).
Dollar pressured by Iran talks and fed uncertainty
The US dollar had come under pressure as traders bet that diplomatic talks with Iran could continue, dampening demand for traditional safe-haven assets. At the same time, uncertainty over the Federal Reserve’s next interest rate steps weighed on the greenback and lent support to the Australian dollar.
Technical picture remains broadly bullish for aud/usd
On the charts, AUD/USD retained a constructive setup:
- The pair held above the 200-period exponential moving average on the four-hour timeframe.
- Price stayed above the 61.8% Fibonacci retracement of the March decline.
- The relative strength index hovered near 60, signalling steady upward momentum rather than overbought conditions.
- The MACD indicator flattened just below the zero line, pointing to a slower but still positive bias.
Key resistance levels were noted around the 78.6% Fibonacci retracement at 0.7111, followed by the recent swing high at 0.7186. On the downside, initial support was seen at 0.7052, then 0.7010 and 0.6994. A deeper pullback could open the way toward 0.6969, 0.6917 and 0.6834 if broader selling pressure returned.
Weekly performance: dollar slips against most majors
Over the course of the week, the US dollar weakened against most major counterparts. It lost:
- 1.36% against the Australian dollar
- 1.21% versus the New Zealand dollar
- 0.95% against the Swiss franc
- 0.93% versus the British pound
- 0.80% against the euro
The only notable area of relative strength for the greenback was against the Japanese yen, where it held up more firmly.
Strong US data reverses dovish rate expectations
The softness in the dollar proved short-lived as fresh US economic data shifted the outlook for interest rates and currency markets.
The latest consumer price index report showed annual inflation at 3.5%, above market forecasts and marking an acceleration in price pressures. This surprise has pushed back expectations for the first Federal Reserve rate cut, with futures markets now leaning toward September rather than the previously expected June start.
Fed Chair Jerome Powell has stressed that recent data have not increased policymakers’ confidence that inflation is on a sustainable path back to the 2% target, reinforcing the case for keeping rates higher for longer.
Labor market strength supports a firmer policy stance
The robust inflation figures have been accompanied by strong employment data. The most recent non-farm payrolls release showed 303,000 new jobs, well above consensus estimates, and the unemployment rate dipped to 3.8%.
This combination of firm growth, tight labor conditions and sticky inflation points to an extended period of restrictive monetary policy in the United States. Such an environment typically underpins the dollar and can weigh on currencies and assets that rely on benign global risk sentiment.
Focus shifts to core inflation gauge
Traders are now looking ahead to the upcoming personal consumption expenditures (PCE) price index, the Fed’s preferred inflation measure. Any upside surprise in PCE would likely reinforce expectations that rate cuts will be delayed, potentially offering further support to the dollar and posing a challenge to the Australian dollar’s recent gains.
Want deeper macro context? Explore how crypto responds to global shifts in our guide on crypto and inflation.
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