The Australian Dollar weakened against the US Dollar amid a risk-off sentiment before President Trump’s tariff deadline on July 9. Trading volumes were lower due to US markets being closed for Independence Day, with AUD/USD experiencing intraday losses of 0.30% above 0.6550.

Australian trade data showed a 2.7% decline in exports for May, narrowing the trade surplus. Expectations are growing for the Reserve Bank of Australia to continue easing monetary policy, with a majority of economists predicting a 25-basis-point rate cut soon, bringing the cash rate to 3.60%.

Federal Reserve and Us Dollar Strength

The Federal Reserve’s steady interest rates support the US Dollar, keeping it within the 4.25% to 4.50% range. AUD/USD remains in a rising wedge pattern, suggesting potential trend exhaustion as it struggles to break the 0.6590 level.

A confirmed breakout above 0.6600 could lead to further gains towards 0.6722, while a rejection might cause a downturn to initial support near 0.6550. In a ‘risk-off’ market, currencies like the US Dollar, Japanese Yen, and Swiss Franc tend to gain strength, driven by safe-haven flows.

With softer trade figures and renewed concerns around global tariffs creeping back into the picture, it’s perhaps unsurprising that the Australian Dollar has come under newer pressure. A 2.7% decline in exports during May has visibly tightened the nation’s trade surplus—enough to rattle confidence in Australia’s external position and pile further weight on monetary authorities to provide accommodative policy steps. Following consistent underperformance in trade, projections for another 25-basis-point rate reduction now appear firmly embedded in market expectations.

Lowe’s central bank, having already shifted to a more dovish stance, seems increasingly likely to draw rates towards 3.60% in response to softer economic momentum. We see this aligning with both weakening domestic data and the global bias towards defensive positioning. The next cash rate decision, therefore, becomes less about *if*, and more about *when*.

Contrasting Central Bank Policies

Meanwhile, over in the US, Powell’s Federal Reserve remains more resolute—interest rates are holding firm between 4.25% and 4.50%, reinforcing the Greenback’s appeal. Unlike its Australian counterpart, the Fed is broadcasting stability, at least for now. It’s helping the Dollar cushion itself as markets take on a more cautious posture. Combine that with elevated geopolitical uncertainty and looming tariff developments, and we find the appetite for safer havens surging. The Japanese Yen and the Swiss Franc are similarly benefitting, as they often do whenever risk appetite fades.

Looking at AUD/USD specifically, this pair is still caught inside a rising wedge pattern—a formation that tends to signal a squeeze or loss of momentum after an extended climb. So far, upward break attempts near 0.6590 have been turned back, suggesting buyer fatigue. That said, the tension is building now: a clear rally and hold above 0.6600 could potentially open the door to 0.6722, where further supply may emerge. A downside break, however, especially beneath 0.6550, puts short-term buyers at risk and gives room for more extended declines.

We’ve seen the AUD react sensitively to shifts in trade sentiment before, and with lower volumes already on show during the US Independence Day holiday, price movements may have been exaggerated. But thin conditions often precede volatility—not dampen it. That’s worth keeping in mind as tariff speculation intensifies before the July 9 threshold.

Timing around the upcoming RBA decision and any clarity from US policymakers will matter. Until then, markets may remain jittery, with price action guided heavily by macro developments and geopolitical outlooks. This places added importance on technical triggers and momentum signals, which can easily push price out of balance when sentiment tilts.

Given how compressions like the rising wedge often resolve, continued monitoring of price reactions near resistance and support thresholds is likely the most practical way forward. Reasset after key numbers, watch the volume carefully once US traders return, and be alert to any headline that might amplify movement.

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