The Australian Dollar has fallen against the US Dollar as concerns grow ahead of President Trump’s tariff deadline on July 9. Trading activity was low due to US markets being closed for Independence Day, causing AUD/USD to lose 0.30%, trading just above 0.6550. Recent Australian trade data revealed a 2.7% drop in exports for May, which reduced the trade surplus. Many economists expect the Reserve Bank of Australia (RBA) to lower interest rates, with a 25-basis-point cut likely soon, bringing the cash rate down to 3.60%.

Federal Reserve and US Dollar Strength

The Federal Reserve’s stable interest rates keep the US Dollar strong within the 4.25% to 4.50% range. AUD/USD is stuck in a rising wedge pattern, indicating potential exhaustion as it struggles to break the 0.6590 barrier. If AUD/USD breaks above 0.6600, it could rise towards 0.6722. However, if it fails, it might drop to initial support around 0.6550. In a risk-averse market, currencies like the US Dollar, Japanese Yen, and Swiss Franc typically gain strength as investors seek safe havens. With subdued trade figures and growing worries about global tariffs, it is expected that the Australian Dollar will face more pressure. The 2.7% drop in exports has narrowed the trade surplus, shaking confidence in Australia’s external position and increasing the need for the RBA to adopt looser monetary policy. With ongoing trade struggles, another 25-basis-point rate cut is now largely anticipated by the market. Governor Lowe’s RBA, having already adopted a dovish stance, is increasingly likely to lower rates to 3.60% in response to weak economic signals. This aligns with the trend of declining domestic data and a global shift towards caution. Thus, the next cash rate decision seems more about *when* than *if*.

Contrasting Central Bank Policies

In contrast, the US Federal Reserve, led by Powell, maintains a firm grip on interest rates between 4.25% and 4.50%, boosting the US Dollar’s appeal. Unlike Australia’s situation, the Fed is signaling stability, which is helping to support the Dollar as markets adopt a cautious outlook. Adding to this are heightened geopolitical risks and upcoming tariff discussions, driving demand for safe-haven currencies like the Japanese Yen and the Swiss Franc. In terms of AUD/USD, it remains within a rising wedge pattern, suggesting possible weakness or loss of momentum after a prolonged increase. Attempts to break above 0.6590 have so far failed, indicating seller exhaustion. However, if it can clearly break and hold above 0.6600, we could see a rise to 0.6722, where more selling pressure may appear. Conversely, if it dips below 0.6550, it could invite further downward movement. The AUD has historically reacted strongly to trade sentiment shifts. With lower trading volumes during the US Independence Day holiday, price fluctuations may have intensified. However, thin trading conditions can lead to volatility rather than calm, especially with tariff talks heating up before the July 9 deadline. The timing of the upcoming RBA decision and any announcements from US officials will be crucial. Until then, markets might experience nervousness, with price movements heavily influenced by macroeconomic news and geopolitical situations. This highlights the significance of monitoring technical signals, which could quickly alter market balance as sentiment changes. Given the typical outcomes of rising wedge formations, keeping an eye on price movements near resistance and support levels is advisable. Watch the volume closely once US traders return, and stay alert for any news that might cause significant price changes. Create your live VT Markets account and start trading now.

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