The Australian Dollar’s Potential Rise Amid US Dollar Weakness

• The Australian dollar is expected to strengthen as the US dollar declines, particularly due to changes in Treasury yields.
• The AUD might face challenges as RBA Governor Michele Bullock maintains a dovish outlook, suggesting further reductions in speed.
• After a retreat from 5.15%, the US dollar has weakened, now sitting at a 30-year yield of 5.03%.

The Australian Dollar (AUD) is likely to gain against the US Dollar (USD) on Friday after experiencing losses in the last session. Typically, when the US dollar weakens, the AUD/USD pair tends to rise. This trend is linked to shifts in US Treasury yields. Meanwhile, the House of Representatives has advanced President Trump’s “one big beautiful bill” to the Senate for further deliberation.

That said, the AUD/USD pair saw a decline on Thursday, as the US dollar received a boost following the release of strong S&P Global Purchasing Managers’ Index (PMI) data. S&P Global’s Composite PMI improved to a May reading of 52.1, up from 50.6 in April. The manufacturing PMI also increased, moving from 50.2 to 52.3. Services PMI also climbed from 50.8 to 52.3.

Earlier this week, the Reserve Bank of Australia (RBA) decreased its official cash rate by 25 basis points, lowering it from 4.10% to 3.85%. Governor Michele Bullock emphasized a cautious stance, supporting the decision to cut interest rates. She indicated that the board is prepared for additional actions if necessary and highlighted the importance of keeping inflation under control.

AUD Gains Ground Amid Cooling Treasury Yields

• The US Dollar Index (DXY), which measures the USD against six major currencies, has recently shown profits. DXY is currently trading at 5.03%, having dropped from 5.15%, suggesting it’s at its highest level since November 2023.
• The House of Representatives approved Trump’s budget proposal, which, according to the Congressional Budget Office (CBO), is expected to increase the deficit by $3.8 billion through tax credits for TIP revenues and US-made car loans.
• Governor Christopher Waller pointed out that the market is keeping an eye on fiscal policy. He mentioned that if tariffs approach 10%, the economy could be in good shape for the second half of the year, potentially allowing the Fed to cut rates later.
• The US dollar faced challenges following Moody’s downgrade of its credit rating from AAA to AA1. This downgrade aligns with Fitch’s recent downgrade and a similar move by Standard & Poor’s in 2011. Moody’s predicts that debt will rise to around 134% of GDP by 2035, up from 98% in 2023, largely due to rising debt service costs and diminished tax revenues.
• The Australian Manufacturing PMI was unchanged at 51.7 in May. However, the service PMI dropped to 50.5 from 51.0, while the combined PMI eased to 50.6 from 51.0.
• The Australian dollar has received support from renewed optimism over the US-China trade ceasefire, along with hopes for more global trade agreements. U.S. Treasury Secretary Scott Bescent mentioned that President Trump intends to enforce tariffs against countries not negotiating in good faith.
• Political unrest in Australia has also impacted the AUD. The opposition coalition disbanded after the Kuomintang withdrew from its cooperation with the Liberal Party, which has allowed the ruling Labour Party to reclaim power with a broader agenda.

AUD/USD Climbs Around the Significant 0.6450 Mark

The AUD/USD pair is trading around 0.6430 on Friday, exhibiting a bullish trend bolstered by daily technical indicators. The pair remains above the nine-day exponential moving average (EMA) and has a 14-day relative strength index (RSI) exceeding the 50 mark, indicating sustained upward momentum.

A notable resistance level sits at 0.6515, a six-month high recorded on December 2, 2024. If this barrier is broken, the pair may test the seven-month high of 0.6687 reached in November 2024.

The immediate support line is at 0.6425, represented by the nine-day EMA, with further backing from a 50-day EMA near 0.6369. A decline beyond this range could jeopardize the positive outlook and potentially push the pair towards the low of 0.5914 seen in March 2020.

AUD/USD: Daily Charts

Australian Dollar Prices Today

The table below outlines the changes in the Australian Dollar (AUD) against major currencies for today. The AUD shows strength against the US dollar.

The heatmap illustrates the shifts in values among major currencies, with the Australian dollar displaying notable strength against the US dollar.