A risk-on sentiment strengthens the Australian dollar against the US dollar after positive news

    by VT Markets
    /
    Jun 24, 2025
    The Australian Dollar (AUD) rose against the US Dollar (USD) on Tuesday for the second day in a row. This increase follows a ceasefire announcement between Iran and Israel made by US President Trump, who mentioned the destruction of Iran’s nuclear facilities and noted missile interceptions. The Iranian parliament’s decision to close the Strait of Hormuz has added to global tensions. On the domestic front, Australia’s private sector is experiencing significant growth, according to S&P Global PMI data, which lessens expectations for a rate cut by the Reserve Bank of Australia.

    Market Focus Shifts

    Attention is now on Fed Chair Jerome Powell’s upcoming testimony before Congress for clues about future interest rates. The US Dollar Index is around 98.20, influenced by dovish comments from Federal Reserve officials. They suggest that rate cuts may be near due to risks in the job market and inflation trends. The Federal Reserve’s position is flexible, with potential easing next month amid global uncertainties. Currently, they have kept interest rates steady at 4.5%, forecasting reductions by the end of 2025. Governor Waller has indicated that easing could begin soon. The People’s Bank of China has kept its Loan Prime Rates stable. The AUD/USD pair is trading close to 0.6480 and is testing the nine-day EMA. If it surpasses this level, it could reach 0.6552. Initial support lies around 0.6440, corresponding with the 50-day EMA, as the AUD remains strong despite market fluctuations. Right now, the Australian Dollar is performing well against the US Dollar, marking its second day of gains. This trend is linked to events in the Middle East and positive domestic economic signals. President Trump’s ceasefire announcement between Iran and Israel, along with reports of disabled nuclear infrastructure, has lowered perceived risks, even if temporarily. The interception of missiles adds further context, highlighting the restraint shown in the region but leaving room for unexpected events, especially with the closure of the Strait of Hormuz, which could disrupt global oil flow and affect commodity-driven currencies. Domestically, Australia’s private sector is still expanding robustly according to the latest S&P Global PMI data. This suggests that the economy is not slowing down as much as previously feared, reducing the likelihood of rate cuts from the Reserve Bank, even as inflation rates approach target levels. This dynamic is already impacting expectations for monetary policy, which have started recalibrating over the past several sessions. Upcoming US events are particularly important. Powell is set to testify before Congress, and recent comments from Waller and others indicate a shift towards a more accommodative stance. We are watching this closely. The US Dollar Index at about 98.20 shows sensitivity to weaker labor data and declining inflation numbers. If Powell’s comments lead to increased expectations for easing, investments in US assets may weaken, allowing for further AUD gains.

    Technical Levels and Market Outlook

    Technical levels are also supporting a bullish outlook. The AUD/USD pair is currently around 0.6480, having tested its nine-day exponential moving average (EMA). If buyers push the pair above this level, the next target could be 0.6552. However, the downside is supported by the 50-day EMA, which is around 0.6440. Overall, the market seems to be favoring AUD strength unless significant surprises occur. In China, the unchanged Loan Prime Rates provide additional support for the Australian Dollar, aligning with a steadier trade outlook for the region. This stability from Beijing helps mitigate expectations of sudden drops in demand. For those trading futures and options on AUD pairs, it may be wise to consider shorter-dated calls with limited downside risks. Implied volatility is compressing but remains sensitive to geopolitical events. Positioning through spreads could be more effective than straightforward directional trades at this time. We will keep monitoring signals, especially regarding upcoming US job data and any firm commitments to rate changes. The recent reactions in US fixed-income markets suggest that traders are becoming more confident about beginning an easing cycle as early as next month. This default position will influence risk-reward scenarios in AUD-linked pairs in the coming weeks. Create your live VT Markets account and start trading now.

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