The AUD/USD pair experienced a modest decline during Friday’s session, as market participants continued to price in the possibility of a Reserve Bank of Australia rate hike in the near term, while the Federal Reserve is still expected to deliver up to two rate cuts later this year. The Australian dollar showed mild weakness against the US dollar during the session, reflecting broader market volatility. After a strong upward move in recent weeks, AUD/USD appears to be entering a phase where consolidation is increasingly likely, allowing the market to digest prior gains.
The 0.69 level on AUD/USD remains a critical zone to monitor, as it has acted as both support and resistance multiple times over the past several years. The break above 0.6750 provided bullish momentum, but given the speed and magnitude of the recent rally, a period of sideways consolidation or a shallow pullback would not be unusual. From a macro perspective, expectations that the RBA may raise interest rates continue to underpin the Australian dollar. At the same time, the prospect of one or two Federal Reserve rate cuts later this year places structural pressure on the US dollar, which remains supportive for AUD/USD over the medium term.
Adding to the constructive outlook, Chinese manufacturing data has come in stronger than expected, reinforcing optimism around the Australian economy due to its heavy exposure to commodity exports to China. Improved Chinese industrial activity typically translates into stronger demand for Australian raw materials, which tends to benefit AUD/USD.
Ultimately, the direction of AUD/USD will remain sensitive to shifts in global risk appetite. A recovery in risk sentiment could provide further upside momentum for the pair. At this stage, there is little incentive to adopt a bearish stance on AUD/USD, and any future US dollar strength is more likely to be expressed against other currencies rather than the Australian dollar.