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AUD/USD Surges to Yearly Highs as Soft US Inflation Data and Trade Optimism Undermine Dollar
Economic
Summary:
The Australian Dollar has extended its rally, pushing AUD/USD to new 2025 highs near 0.6550, as dovish U.S. inflation data sparks Fed rate cut bets and optimism around U.S.-China trade talks bolsters risk sentiment.
Buy
CLOSEDAUDUSD
End Time
0.65300
Entry Price
0.66500
TP
0.64800
SL
0.64722 -0.00079 -0.12%
500
Points
Loss
0.64800
SL
0.64795
CLOSING
0.65300
Entry Price
0.66500
TP
The Australian Dollar (AUD) continued its impressive climb this week, with AUD/USD extending gains for a third consecutive session on Wednesday to breach new yearly highs near the 0.6550 level. The rally has been underpinned by renewed U.S. Dollar weakness following softer-than-expected inflation data and cautious optimism surrounding trade negotiations between the United States and China.
This surge marks a notable shift in sentiment toward the Aussie, which has benefited from both domestic resilience and shifting expectations on U.S. monetary policy. As market participants reassess the Federal Reserve’s path, the AUD has emerged as a relative outperformer among G10 currencies.
The immediate catalyst for the AUD/USD advance came from the latest U.S. Consumer Price Index (CPI) figures, which showed inflation slowing more than anticipated. Headline inflation rose by 2.4% in the year to May, below both the market consensus and prior readings. The core CPI, which excludes volatile food and energy prices, also decelerated to 2.8% annually — a full tenth below estimates.
This undershoot in inflation data amplified market expectations for a Federal Reserve rate cut in September, with traders now seeing over a 65% probability of easing, according to interest rate futures. The result was a sharp drop in U.S. Treasury yields and broad-based selling pressure on the Greenback.
The U.S. Dollar Index (DXY), which tracks the currency against a basket of peers, fell to its lowest levels in nearly two months. The move highlights growing investor conviction that the Fed may finally pivot toward policy accommodation, after more than a year of hawkish rhetoric.
In a separate but complementary development, reports emerged suggesting that U.S. and Chinese officials had made progress in negotiations related to rare earth minerals during meetings in London. While details remain scarce and any agreement is yet to be formally confirmed by Presidents Trump and Xi Jinping, markets viewed the talks as a de-escalation signal — one that helped lift risk sentiment and supported currencies like the Aussie that are sensitive to global trade flows.
Rare earths, critical in the production of advanced electronics and military equipment, have long been a sticking point in the U.S.-China trade standoff. An easing in tensions surrounding this key sector could pave the way for broader cooperation or at the very least, a pause in tariff escalations.
Domestically, the economic calendar was light, with no tier-one data releases out of Australia on Wednesday. This left traders looking ahead to Thursday’s release of the Melbourne Institute’s Inflation Expectations — a monthly survey that could offer clues on domestic price pressures and influence Reserve Bank of Australia (RBA) expectations.
Although the RBA remains firmly in a holding pattern for now, sticky inflation could limit its ability to follow other central banks into dovish territory. For now, however, global macro factors — not local data — are steering the AUD/USD trajectory.
Technical Analysis
From a technical standpoint, AUD/USD continues to show strength, trading firmly within a bullish channel on the short-term chart. Price action has managed to hold above the 50-period Exponential Moving Average (EMA50), reinforcing the pair’s bullish structure.
Despite some intraday pullback, the currency pair is now testing the critical resistance zone around 0.6535–0.6550 — an area that has previously capped gains. A sustained break above this barrier could open the door to a further leg higher, with targets near 0.6650 and beyond.
Supporting the bullish case is the Relative Strength Index (RSI), which remains in positive territory despite recent consolidation. Bullish overlapping signals have begun to reemerge after the indicator
TRADE RECOMMENDATION
BUY AUDUSD
ENTRY PRICE: 0.6530
STOP LOSS: 0.6480
TAKE PROFIT: 0.6650
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