7 July 2025,05:29
Daily Market Analysis
7 July 2025, 05:29
Key Takeaways:
*AUD slips as RBA seen cutting rates amid weak data: Markets brace for a dovish shift as soft GDP and subdued inflation reinforce calls for easing, with traders pricing multiple cuts ahead.
*Tariff threats and China ties weigh on Aussie outlook: Rising U.S. trade tensions rattle sentiment, with Australia’s reliance on Chinese exports amplifying downside risks to the AUD
Market Summary:
The Australian Dollar continued to soften on Monday, extending its multi-session decline amid rising expectations that the Reserve Bank of Australia (RBA) will shift toward monetary easing in its upcoming meeting. The AUD remains one of the most vulnerable major currencies in the current macro landscape, caught between a dovish policy pivot and intensifying global trade tensions.
Economists widely anticipate the RBA will deliver a 25-basis-point rate cut this week, lowering the cash rate to 3.60%, as policymakers confront sluggish growth and muted inflation. First-quarter GDP printed a meager 0.2% QoQ, while core inflation has slipped to 2.1% YoY—both reinforcing the case for further easing. Markets have now priced in three additional cuts by year-end, with the path of least resistance clearly tilted toward more accommodation.
Compounding AUD weakness is the growing uncertainty surrounding international trade. President Trump’s latest warning of reinstating elevated tariffs by August 1 on nations without bilateral deals has reignited concerns for export-reliant economies. For Australia, the stakes are particularly high given its trade exposure to China, which faces renewed scrutiny in Washington. Any escalation in U.S.-China tensions could directly weigh on the Aussie through both trade and sentiment channels.
Meanwhile, global risk appetite remains fragile. Weak Chinese demand, an OPEC+ supply boost, and a potentially stronger U.S. dollar—all create additional headwinds for Australia’s commodity-sensitive currency. With the Fed showing restraint in cutting rates despite softer data, rate differentials could continue to favor the greenback, particularly if U.S. inflation prints remain sticky.
In the near term, the Aussie is likely to stay on the defensive, with traders closely watching the RBA’s tone and guidance. A dovish surprise or sharper deterioration in trade rhetoric could push AUD/USD below 0.6500. Conversely, any signs of RBA patience or de-escalation in tariff risks may offer temporary relief. Still, with domestic growth slowing and external shocks mounting, the Australian Dollar’s outlook remains clouded by downside risk.
AUD/USD has weakened notably, retreating below the midline of its rising channel and currently hovering near the 0.6515 handle. The pair has now erased recent gains and is testing key support levels, as bearish momentum builds amid renewed rate cut bets and trade uncertainty.
Technically, the Relative Strength Index (RSI) has declined to 36, entering bearish territory for the first time in weeks. The breakdown below 50 reflects waning bullish conviction and growing downside pressure. Unless RSI stabilizes above 40, the risk of further losses remains elevated.
The MACD adds to the cautionary tone. A bearish crossover occurred last week, and both the MACD line and histogram have since moved deeper into negative territory. This reinforces the view that momentum has shifted decisively in favor of the bears.
At present, AUD/USD appears at risk of a deeper corrective phase, driven by macro headwinds and fading technical strength. A decisive breakdown from current levels could confirm a shift away from the previously constructive structure.
Resistance levels: 0.6530, 0.6600
Support levels: 0.6500, 0.6450
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