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Trade of The Day: AUD/USD

  • The AUDUSD exchange rate opened today below the 10- and 30-day exponential moving averages (EMA10 – yellow, EMA30 – light purple).
  • Core PCE inflation in the US rose to 3.3% YoY in April (previously 3.2% YoY).
  • The swap market-implied probability of a US interest rate hike in 2026 increased from 82% to 86% over the course of the week.

Recommendation:

  • Position: Short (SELL) on AUDUSD at market price
  • Target Price (Take Profit; TP): 0.70550 (TP1), 0.70170 (TP2)
  • Stop Loss (SL): 0.72100

Source: xStation5

Opinion

The AUDUSD pair erased some of its losses from today’s session following the release of the latest US inflation data, which turned out slightly softer than expected. Core PCE increased in line with expectations to 3.3% year-on-year, while on a month-on-month basis, prices rose by 0.2% (against a 0.3% forecast). However, the lack of a negative inflation surprise is not exactly “good news” for monetary policy, especially since inflation remains in an upward trend and is proving to be stickier than assumed. The Fed’s narrative is also becoming increasingly hawkish. Recent remarks from Cook, Goolsbee, Kashkari, and Jefferson unanimously emphasize the growing and materializing upside risks to inflation, along with a clear readiness to hike interest rates should this trend continue.

Furthermore, the AUDUSD’s reaction to the optimism generated by hopes of a truce between Iran and the US last week was quite moderate, and the gains were insufficient to push the price above the 10- and 30-day exponential moving averages. Therefore, risk-sensitive currencies (including the AUD) can be expected to remain under heavy pressure until real progress is made in the Middle East, and a potential rebound in reaction to the end of the war is unlikely to trigger a rapid return to an upward trend for the pair. The options market is also pointing to further declines for AUDUSD. The 1-week and 1-month risk reversal indicators sit below zero, showing that options betting on the depreciation of the AUD dominate the market. In other words, the market is systematically hedging against further declines in AUDUSD consistently across various time horizons.

Methodology

The recommendation was prepared based on the technical analysis of the AUDUSD chart and the fundamental analysis of the discussed economies (monetary policy in Australia and the US). The direction of the recommendation was determined using moving averages and market expectations regarding central bank policies. Take Profit and Stop Loss levels were set using the Fibonacci retracement of the last upward wave and price action (TP1 at the 50.0 Fibo level, TP2 between the D1 interval EMA100 and the 61.8 Fibo level, and SL at the support from which the price rebounded before breaking the last peak).

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EURUSD Rebounds Following Weak US Data

Weaker US data, in-line inflation, hawkish ECB minutes, and increased Iranian compliance trigger a sharp rebound in the EURUSD pair. A noticeable shift has taken place in the financial markets over the last few hours. The exchange rate of the major currency pair, EURUSD , recorded a sharp rebound after earlier, steeper declines briefly pushed it below the 1.16 level. The euro is currently gaining around 0.1% against the US dollar, trading around the 1.1630 mark. This move stems from a combination of disappointing macroeconomic data from the US, hawkish signals from the European Central Bank, and new developments on the geopolitical front.

Weaker US Macro Data and Inflation Relief

The main catalyst for the weakening of the greenback came from the latest macroeconomic releases from across the Atlantic, which cooled investors’ hawkish fears:

  • Disappointing GDP Growth: The US Bureau of Economic Analysis published its second revision of Q1 GDP, lowering the economic growth estimate to 1.6% from the previous 2.0%. The market widely expected the figure to hold steady at 2.0%.
  • PCE Inflation In-Line with Expectations: The headline Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, rose to 3.8% year-over-year in April (up from 3.5% in March), which was fully in line with market consensus.
  • Core PCE Stabilization: The Core PCE index (excluding food and energy prices) came in at 3.3% annually, also matching expectations. Furthermore, on a monthly basis, core inflation increased by 0.2%, coming in slightly below forecasts of 0.3%.

The Q1 GDP revision shows lower economic growth. The fact that the conflict with Iran was already underway in March may suggest that Q2 data will also face a substantial negative impact from this front. Source: Bloomberg Finance LP, XTB

PCE inflation rebounds in line with expectations. This stands in stark contrast to the CPI inflation release, which surprised investors with noticeably higher readings. Source: Bloomberg Finance LP The fact that inflation did not surprise to the upside, despite a massive surge in commodity prices, brought relief to investors. Combined with the clear slowdown in GDP momentum, this translated into a decline in the dollar index. In-line inflation and weaker growth could damp market expectations regarding swift rate hikes from the Fed.

Hawkish ECB and Pressure on the Eurozone

While the US economy sends signs of cooling, information supporting the common currency is flowing in from Europe. The published account of the European Central Bank’s April meeting (the so-called minutes) clearly indicates that pro-inflationary risk factors in the Eurozone have significantly intensified. ECB officials highlighted mounting price pressures, suggesting that the European regulator may be forced to keep interest rates at restrictive levels for a longer period. The divergence in monetary policy outlooks between a potentially softer Fed and an inflation-wary ECB provided a strong impetus for the strengthening of the EURUSD.

The market is currently pricing in a staggering 93% probability of an ECB hike in June . Geopolitics: Sanctions and a Potential Nuclear Breakthrough Concurrently, market attention remains focused on the Middle East. Energy commodity prices rose amid renewed clashes between US and Iranian forces in the Persian Gulf region. WTI crude oil surged by over 3% during the morning European session. The situation was further exacerbated by the decision of US Treasury Secretary Scott Bessent, who announced sanctions against a new Iranian institution that had unilaterally declared control over the Strait of Hormuz. However, market sentiment improved following reports from Saudi Arabia’s Al Hadath news channel. According to these reports, Islamabad is set to propose a compromise to Washington under which Iranian uranium would be transferred to Beijing under strict international supervision. Such a diplomatic move could significantly de-escalate the regional conflict, shaving some risk premium off the markets and dampening the safe-haven demand for assets like the dollar. On the other hand, Trump recently stated that he does not want to agree to Iranian uranium ending up in either Russia or China.

Technical Outlook on EURUSD

The combination of lower-than-expected US economic growth data, a hawkish tone from the ECB, and a potential diplomatic breakthrough regarding the Iranian nuclear program provided solid ground for a sharp EURUSD rebound. Investors gained arguments suggesting that the US central bank will not be forced into immediate policy tightening. The EURUSD closing with such a pronounced candlestick shadow could suggest that key support at the 1.16 level is holding, creating the potential to test resistance at the 50.0% retracement level .

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Canadian Dollar: Rebalancing offers near-term relief – BNY

Geoff Yu at BNY highlights that Canadian Dollar (CAD) dynamics differ from the U.S., with equity-based rebalancing pointing toward CAD support as growth and allocation trends move opposite to the US Dollar. Fixed income steepening and poor CAD performance are seen amplifying CAD buying signals, suggesting some relief for the Canadian Dollar into month-end.

Canadian Dollar supported by flows

“Mathematically, our figures suggest that the unwinding of USD/CAD hedges – the discontinuation of forward USD selling against CAD on U.S. positions – played a big role in the dollar’s performance and some reversion is needed.”

“The only other equity-based rebalancing signal is in the CAD, where growth and asset allocation trends are pointing in the opposite direction.”

“In contrast, CAD buying is being amplified by similar steepening in bond markets on top of poor currency performance.”

“USD and CAD have again generated the same net selling and buying signals, though the dollar’s signal is far weaker, as poor bond performance offset dollar purchases. In contrast, CAD buying is being amplified by similar steepening in bond markets on top of poor currency performance.”

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GBP recovers against US Dollar; outlook remains weak due to Iran worries

  • The British Pound recovers almost half of its early losses against the US Dollar.
  • Middle East tensions re-escalate due to the exchange of attacks between the US and Iran.
  • 10-year UK gilt yields have remained lower in the past few weeks due to easing hawkish BoE bets.

The British Pound claws back half of its early losses and rebounds to near 1.3400 against the US Dollar (USD) during the European trading session on Thursday from the intraday low of 1.3367. The recovery move in the GBP/USD pair appears to be short-lived as Middle East conflicts have re-escalated.

At press time, S&P 500 futures and Asian stock markets have also recovered significantly. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, retreats from its intraday high of 99.54, but is still 0.18% higher to near 99.40. A slight correction in the WTI Oil price has also been observed from the day’s high of $91.17 to near $90.14.

Geopolitical tensions in the Gulf region have been reignited due to the exchange of attacks between the United States (US) and Iran. Earlier in the day, Iran’s Islamic Revolutionary Guard Corps (IRGC) said that it attacked US military bases in retaliation against Washington’s strikes near Bandar Abbas airport.

This was the second attack by the US this week after the so-called “defensive strikes” on Iranian boats deploying mines and their missile launching sites.

Meanwhile, United Kingdom (UK) gilt yields have also recovered strongly after a weak opening due to Middle East concerns. 10-year UK gilt yields have rebounded to near 4.87% from the day’s low of 4.81%.

UK gilt yields have been declining in the past few weeks due to easing hopes of a near-term Bank of England (BoE) interest rate hike. Traders have pared hawkish BoE bets lately due to weakening job market conditions and lower household spending.

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AUD/USD Price Forecast: On verge of Head and Shoulder breakdown

  • AUD/USD tumbles to near 0.7100 as the Australian Dollar underperforms due to multiple headwinds.
  • The exchange of attacks between the US and Iran has dented optimism towards a peace deal.
  • Slower-than-projected Australian CPI growth in April has forced traders to pare hawkish RBA bets.

The Australian Dollar (AUD) slumps over 0.5% to near 0.7100 during the Asian trading session on Thursday. The Aussie par slumps as the antipodean underperforms its peers due to risk-off market sentiment and diminished hawkish Reserve Bank of Australia (RBA) bets.

Australian Dollar Price Today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.30%0.38%0.05%0.16%0.55%0.51%0.32%
EUR-0.30%0.08%-0.28%-0.15%0.25%0.22%0.02%
GBP-0.38%-0.08%-0.34%-0.23%0.17%0.15%-0.07%
JPY-0.05%0.28%0.34%0.11%0.51%0.46%0.28%
CAD-0.16%0.15%0.23%-0.11%0.41%0.36%0.16%
AUD-0.55%-0.25%-0.17%-0.51%-0.41%-0.02%-0.24%
NZD-0.51%-0.22%-0.15%-0.46%-0.36%0.02%-0.21%
CHF-0.32%-0.02%0.07%-0.28%-0.16%0.24%0.21%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

Market sentiment turns favorable for safe-haven assets as Iran has retaliated against the United States (US) attacks near Bandar Abbas airport by striking its military bases in the Gulf region. At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.3% higher, slightly above 99.50. S&P 500 futures and all major Asian stock markets are bleeding, as of writing, indicating a significant dent in investors’ risk appetite.

Hawkish RBA prospects have squeezed as the Australian Consumer Price Index (CPI) data for April showed that inflationary pressures cooled down at a faster-than-expected pace. Month-on-month CPI arrived at 0.4%, lower than 0.6% estimates and the previous reading of 1.1%. On an annualized basis, the Australian CPI grew at a moderate pace of 4.2% against expectations of 4.4% and the March reading of 4.6%.

Following the Australian CPI data, markets now imply almost no chance of a June move, while the probability of an August hike has more than halved to 40%, Reuters reports.

AUD/USD technical analysis

AUD/USD trades significantly lower at around 0.7100 as of writing. The near-term tone of the pair is bearish as it holds below the 20-period exponential moving average (EMA), which is at 0.7158. Also, the Head and Shoulder (H&S) formation backs a bearish bias.

The Relative Strength Index (RSI) is near 43, indicating subdued momentum rather than oversold conditions, hinting that sellers still retain the upper hand.

Looking down, the pair could enter a fresh leg of decline if it breaks below the neckline of the H&S formation at around 0.7070. Major support zones will be 0.7050 and the April 13 low around 0.6990. On the topside, the 20-day EMA at 0.7158 is the first resistance to beat for the bulls to ease immediate downside pressure and open the way for a more sustained recovery towards 0.7200.

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Euro slumps below 1.1600 against US Dollar amid fears of US-Iran war resumption

  • EUR/USD declines to near 1.1590 as Iran’s retaliation against US attacks near Bandar Abbas has dampened market mood.
  • The IRGC attacks US military bases and threatens a more decisive response if it attacks again.
  • Investors await the US-Germany inflation data.

The Euro (EUR) slides 0.3% to near 1.1590 against the US Dollar (USD) during the Asian trading session on Thursday. The major currency pair faces intense selling pressure as market sentiment turns risk-averse, following Iran’s retaliation against United States (US) attacks near Bandar Abbas airport, Tasnim agency reported.

As of writing, S&P 500 futures are down 0.3% below 7,500, reflecting a sharp dent in investors’ risk appetite. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps over 0.3% to near 99.53.

Earlier in the day, the Fars News Agency reported that three explosions were heard east of Bandar Abbas and air defenses were activated for several minutes.

In response, Iran’s Islamic Revolutionary Guard Corps (IRGC) has attacked US military bases and has threatened ‘a more decisive’ response if Washington attacks again.

The exchange of attacks between both nations has dented optimism towards a permanent deal. Earlier this week, US officials, including President Donald Trump, expressed confidence that a deal could be announced soon.

Meanwhile, investors await the US Personal Consumption Expenditure Price Index (PCE) data for April and the preliminary German Harmonized Index of Consumer Prices (HICP) data for May, which will be released on Thursday and Friday, respectively.

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New Zealand Dollar drops after NZ budget announcement

  • The New Zealand Dollar faces selling pressure after the NZ budget 2026 announcement.
  • On Wednesday, the RBNZ held its OCR steady at 2.25%, but guided a hawkish monetary policy outlook.
  • Renewed concerns over the US-Iran deal have underpinned the US Dollar.

The New Zealand Dollar (NZD) drops to near 0.5883 against the US Dollar (USD) during the Asian trading session on Thursday, following the New Zealand (NZ) budget 2026 announcement. The Kiwi pair edges down even as the nations’ Debt Management Office (DMO) has reduced its gross bond issuance plans for four years to June 30, 2030 to NZ$124 billion from NZ$130 billion forecasted in December, which diminishes fears of widening fiscal concerns.

For the current year, DMO’s plans to issue NZ$34 billion worth of bonds remain unchanged with the December forecast.

However, the broader outlook of the antipodean has improved as prospects of the Reserve Bank of New Zealand (RBNZ) raising interest rates in the July meeting have increased after a “hawkish hold” on Wednesday.

Markets quickly nudged up the probability of a quarter-point increase in July to around 75%, and saw rates reaching 3.0% by year’s end, Reuters report.

On Wednesday, the RBNZ left its Official Cash Rate (OCR) steady at 2.25%, as expected, but expressed the need to tighten monetary conditions amid rising inflation. “Committee sees inflationary pressures going forward, agrees cash rate needs to be higher going forward,” RBNZ Governor Anna Breman said.

Meanwhile, the US Dollar trades sharply higher on renewed concerns regarding the dismissal of the United States (US)-Iran negotiations. As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.2% higher to near 99.40.

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GBP softens to near 1.3400 as US-Iran tensions boost safe-haven US Dollar

  • GBP/USD loses momentum to around 1.3400 in Thursday’s early Asian session. 
  • US military carried out new strikes in Iran; Trump said he won’t rush into a deal with Tehran. 
  • Traders reduce their bets on BoE rate hikes due to easing concerns about political developments and softer UK data. 

The GBP/USD pair attracts some sellers near 1.3400 during the Asian trading hours on Thursday. The British Pound (GBP) weakens against the US Dollar (USD) on fresh geopolitical developments. Markets remain cautious ahead of the release of the US April Personal Consumption Expenditures (PCE) Price Index inflation report, which is due later in the day. 

The US military carried out new strikes in Iran, targeting a site that posed a threat to US forces and commercial traffic, according to Reuters. The US described the actions as measured, purely defensive, and intended to maintain the ceasefire. 

On Wednesday, President Donald Trump vowed to reach a favorable deal to end the war with Iran, warning that the regime’s efforts to bore him with waiting will not work because “I don’t care about the midterm elections.” Rising tensions and signs of a prolonged conflict in the Middle East could boost a safe-haven currency such as the Greenback and create a headwind for the major pair in the near term. 

Markets have scaled back expectations for a rate hike from the Bank of England (BoE) following softer inflation data, an unexpected rise in the Unemployment Rate to 5.0% for April, and easing political concerns.  

“Traders now price one rate hike fewer in 2026 than at the end of the previous week, and gilt yields saw the biggest weekly drop since late-2023,” Pantheon Macroeconomics said in a note on Tuesday. “We estimate that lower yields were driven by lower oil prices, a fall in betting-market odds on Sir Keir Starmer being replaced, and Andy Burnham committing to maintain current fiscal rules,” they added.