The AUD/USD pair continues to demonstrate resilience amid a weakening US dollar backdrop, supported by strong Australian fundamentals and a technically bullish structure. With global sentiment favouring risk-on assets and the Reserve Bank of Australia maintaining a relatively hawkish posture, the outlook for the Australian dollar remains constructive heading into mid-2025.

Fundamental Analysis

Australia’s macroeconomic profile remains notably resilient. Quarterly GDP growth, although moderate at 0.2%, is still positive, and the unemployment rate has improved to 4.1%, suggesting underlying labour market strength. Consumer confidence is at 92.1, the highest among all major economies, pointing to robust domestic demand.

Inflation dynamics in Australia are also firm. Year-on-year inflation sits at 2.4%, while month-on-month inflation has accelerated to 0.9%. These figures are well above those seen in the US, where month-on-month inflation is just 0.2% and growth has contracted by -0.2%. As a result, the RBA’s current policy rate of 3.85% is likely to remain stable or even be raised, especially if inflation pressures persist. In contrast, the Federal Reserve is under increasing pressure to ease policy given the economic contraction and growing fiscal imbalances.

On the external front, Australia continues to post a solid trade surplus, most recently recorded at 5.4 billion. Meanwhile, the US is running a trade deficit of over 61 billion. Australia’s current account deficit, although negative, is smaller in scale relative to the US when measured against GDP. Together, these dynamics offer fundamental justification for AUD strength versus USD.

Technical Analysis

The technical picture for AUD/USD is clearly bullish. The daily chart shows price trading above the Ichimoku Cloud, with all components in alignment. The Tenkan-Sen is above the Kijun-Sen, confirming bullish short- and medium-term momentum. The Chikou Span is positioned above price and cloud, reinforcing trend strength. The future Kumo is bullish, with Leading Span A well above Leading Span B and widening, suggesting the uptrend is sustainable.

Momentum indicators validate the bullish narrative. RSI is at 56.74, indicating strong but not overextended buying interest. MACD is marginally positive, with the MACD line crossing above the signal line and the histogram printing green bars, signalling early trend acceleration. Price action has been consolidating just below recent highs near 0.6500, with shallow pullbacks being absorbed quickly by buyers.

Volume has remained steady during this consolidation, indicating healthy participation without signs of distribution or weakness.

Support is located around 0.6450 to 0.6475, with resistance at 0.6520 and then 0.6580. A breakout above 0.6520 would likely trigger a move toward the March highs.

Sentiment Analysis

Sentiment is supportive of AUD/USD strength. Broad market risk appetite is improving, which tends to benefit pro-cyclical currencies like the Australian dollar. Additionally, seasonal factors favour AUD strength in June, historically one of its best-performing months.

Retail trader positioning remains relatively balanced, allowing room for trend continuation without excessive crowding. FX options data shows increasing interest in AUD calls, while institutional desks have reported reduced short exposure to the Australian dollar.

In contrast, sentiment towards the US dollar has turned increasingly negative. With traders anticipating Fed rate cuts and citing persistent US fiscal issues, bearish USD sentiment is helping to buoy AUD/USD.

Conclusion

AUD/USD presents a strong bullish case supported by macroeconomic stability, rising inflation, a solid trade position, and a technically sound uptrend. The divergence between Australia’s resilient economy and the US’s stagnation adds fundamental weight to the trade idea, while sentiment remains favourable without being overcrowded. With all major factors aligning, AUD/USD offers a well-supported opportunity for continued upside as the US dollar weakens further.

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