AUD/USD Outlook: Australian Dollar and Chinese Yuan Rally, But Gains May Stall

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The US dollar (USD) was the weakest major currency on Tuesday, as softer US CPI data and positive trade headlines allowed traders to refocus their attention on the Federal Reserve’s (Fed) policy outlook. With US–China tariffs significantly reduced for 90 days, investors now have ample time to anticipate a deal being finalised—easing concerns over both US and global recession risks.

The Chinese yuan also rose to a six-month high on Tuesday after the US and China released a joint statement. This risk-on tone, combined with a weaker US dollar and stronger yuan, helped the Australian dollar flourish—making AUD/USD the strongest major currency on the day.

The Canadian dollar clawed back 0.4% of this week’s earlier losses after USD/CAD met resistance at the 1.40 handle, as investors welcomed some of Prime Minister Carney’s Washington-friendly cabinet picks. GBP/USD rose 1% and formed a bullish engulfing day, EUR/USD pared most of Tuesday’s losses with a 0.85% gain.

Nasdaq 100 and S&P 500 futures extended their post-trade deal gains for a second day, though volatility was reduced and the Dow Jones retraced -0.6% after meeting resistance at the November high. ASX 200 futures rose 0.22% overnight, though it met resistance at the Jan 20 low of 8327.

Australian Dollar (AUD) Technical Outlook

AUD/USD may have been the strongest FX major, but the Australian dollar made the most ground against the Canadian dollar.

AUD/USD formed a strong bullish engulfing candle and closed above both the 200-day simple moving average (SMA) and exponential moving average (EMA), bringing the March high at 0.6515 into focus for bulls today.
AUD/CAD rallied 1.2% and closed just above 0.90, although it encountered resistance at the 200-day SMA around 0.9040.
AUD/EUR climbed to a 28-day high, but potential resistance lies nearby at the March volume point of control (VPOC) and this week’s VPOC, both hovering around the 0.5800 handle.
AUD/CHF closed above 0.54 to mark a 28-day high, as traders continued to rotate out of safe-haven currencies such as the Swiss franc (CHF).
AUD/JPY rose for a second consecutive day, supported by broad yen (JPY) weakness. A break above the March high and 96.00 handle is in focus, though resistance may be found at the 200-day EMA (95.92) and VPOC near 96.50.
AUD/NZD extended its winning streak to five days and reached a 24-day high, although overhead resistance looms at the March 21 low (1.0913) and April 9 high (1.0906).

AUD/USD Technical Analysis: Australian Dollar vs US Dollar

The bullish engulfing candle on AUD/USD is hard to ignore, placing the Aussie less than a day’s trading range from its May high by recent standards. However, a sustained break above 0.6515 will likely require continued strength from Wall Street indices and further appreciation of the Chinese yuan.

While an eventual breakout appears likely, both equity markets and the yuan are showing early signs of exhaustion—leaving AUD/USD vulnerable to a false break above 0.65 before the genuine move unfolds. Also worth noting is the bearish divergence on the daily Relative Strength Index (RSI 2), which may hint at short-term fatigue for bulls.

USD/CNH Technical Analysis: US Dollar vs Chinese Yuan

The Chinese yuan (CNH) reached a six-month high, sending USD/CNH lower for a third straight day. However, the small spinning top doji that formed on Tuesday signals a loss of bearish momentum and marks yet another false break below the monthly S2 pivot at 7.1936. A bullish divergence has also emerged on the daily Relative Strength Index (RSI 2), suggesting a bounce—albeit potentially minor—could be due. This, in turn, may cap further gains for AUD/USD in the near term and could trigger a pullback if the yuan weakens alongside Wall Street indices.

Economic Events in Focus (AEST / GMT+10)

08:45 – New Zealand retail sales (Apr), Migration and Visitors (Apr)
09:50 – Japanese Producer Prices (Apr)
11:30 – Australian wage price index (Q1)
16:00 – German CPI (Apr)
19:00 – Chinese outstanding loan growth, M2 money supply
19:15 – Fed Waller speaks
21:00 – OPEC monthly report
23:10 – Fed Governor Jefferson speaks

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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