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AUD/USD Breaks Higher on Risk Optimism, US Fiscal Fears
Economic
Summary:
The Australian Dollar surged to fresh year-to-date highs near 0.6590 on Tuesday, fueled by strong Chinese manufacturing data and growing headwinds for the US Dollar, including debt concerns, Fed rate cut speculation, and trade deal uncertainty.
Buy
TradingAUDUSD
EXP
0.65750
Entry Price
0.68000
TP
0.65000
SL
0.65696 -0.00012 -0.02%
0
Point
Flat
0.65000
SL
CLOSING
0.65750
Entry Price
0.68000
TP
The Australian Dollar (AUD) extended its rally on Tuesday, climbing to fresh year-to-date highs against the beleaguered US Dollar (USD) and reversing earlier losses amid a backdrop of improving Chinese economic data and deepening US macroeconomic woes. The AUD/USD pair is now trading around 0.6590 — its highest level in 2024 — marking a second straight day of gains as the greenback continues to retreat.
While the Aussie’s strength has largely tracked risk sentiment and Chinese macro signals, the latest leg of this rally appears to be fueled more by USD-specific vulnerabilities. A growing chorus of investor concerns — from soaring US debt and delayed trade agreements to a dovish shift in Federal Reserve expectations — has set the stage for a broad pullback in the Dollar, which is struggling to find support even amid heightened global uncertainty.
Helping to amplify the AUD’s momentum, economic data out of China — Australia’s largest trading partner — offered a welcome surprise. Fresh figures released early Tuesday showed that Chinese manufacturing activity returned to expansion in June, confounding forecasts and marking a stark rebound from Monday’s softer NBS Purchasing Managers’ Index (PMI) data. The improvement in private-sector metrics helped restore confidence in China’s economic resilience and further cemented the Australian Dollar’s appeal as a China-proxy play.
In particular, Australian exporters — whose prospects are closely tied to Chinese demand — stand to benefit from renewed momentum in the Chinese factory sector. This cyclical tailwind has helped lift the AUD, reinforcing technical and sentiment-driven support for the currency even as broader markets remain cautious.
Meanwhile, the US Dollar continues to suffer under the weight of mounting macro pressures. First, fiscal policy is once again in focus as former President Donald Trump’s controversial tax package edges closer to approval. The bill, projected to add over $3.3 trillion to the national debt over the coming decade, has spooked investors already wary of America’s ballooning deficit. As a result, demand for USD-denominated assets has weakened, and yields have moved erratically as markets reprice long-term risks.
In parallel, speculation over the Federal Reserve’s rate path continues to build. Traders are now pricing in a growing probability of interest rate cuts starting in the second half of the year. Weakness in recent US economic prints, including lackluster job growth and slowing inflation, has added fuel to this narrative. But all eyes now turn to Fed Chair Jerome Powell, who is set to speak at the ECB’s central banking forum in Sintra, Portugal later today. His comments may help clarify the timing and scale of potential rate adjustments, with any dovish tone likely to reinforce selling pressure on the greenback.
Compounding these concerns is the lack of meaningful progress on trade deals as the July 9 deadline approaches. Despite negotiations, no major breakthroughs have materialized, and the threat of additional tariffs looms large. For now, investors are pricing in an increased risk premium on the Dollar, making higher-yielding, risk-sensitive currencies like the Australian Dollar more attractive by comparison.
Technical Analysis 
From a technical perspective, the AUD/USD continues to exhibit bullish characteristics on the short-term chart. After briefly consolidating, the pair has regained upward traction, building on support from its 50-day exponential moving average (EMA), which remains firmly below price action.
The Relative Strength Index (RSI) had entered overbought territory during the latest leg higher but is now offloading excess froth through minor intraday pullbacks, offering bulls a chance to reload. The primary trend remains upward, and analysts see further room for appreciation if key resistance levels are broken.
Immediate upside targets include 0.6620 — a psychological and technical resistance zone — followed by a potential test of the 0.6670–0.6700 range, which served as a critical ceiling during previous rallies in late 2023. If momentum holds and Powell’s remarks lean dovish, a broader push toward 0.6750 or even 0.6800 could unfold over the coming weeks.
On the downside, initial support lies at the 9-day EMA near 0.6540, while the 50-day EMA at 0.6490 would offer deeper structural support. A break below these levels would weaken the bullish bias but remains unlikely unless US macro surprises turn significantly in favor of the Dollar.
TRADE RECOMMENDATION
BUY AUDUSD
ENTRY PRICE: 0.6575
STOP LOSS: 0.6500
TAKE PROFIT: 0.6800
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