Aussie Dollar Hits Six-Month Peak Amid US Economic Uncertainty
Aussie Dollar Surges as US Dollar Falters
The Australian Dollar (AUD) is enjoying a winning streak, reaching a fresh six-month high against the US Dollar (USD) on Monday. This surge comes as the US Dollar weakens under pressure from growing concerns about the US fiscal deficit.
The AUD/USD pair climbed to 0.6537, marking its strongest point since December 2024. This upward momentum is fueled by the US Dollar’s struggles, which are linked to increasing uncertainty surrounding the US economy. This uncertainty is particularly pronounced due to potential repercussions from President Trump’s “One Big Beautiful Bill,” which is expected to increase the US deficit by $3.8 billion.
RBA Rate Cuts Could Impact AUD’s Gains
However, the AUD’s ascent might be tempered by the Reserve Bank of Australia’s (RBA) policy outlook. Following a recent 25 basis point interest rate cut, RBA Governor Michele Bullock has signaled the possibility of further cuts if the economic outlook deteriorates. This dovish stance could put downward pressure on the AUD.
Trade Tensions and Australia-China Relations
The Australian Dollar has also benefited from positive sentiment surrounding a 90-day US-China trade truce and hopes for further trade deals. However, the RBA is closely watching developments in US-China trade negotiations, as China is a significant trading partner for Australia.
Adding to the complexity is the ongoing tension between Australia and China over the Darwin Port lease. The Chinese embassy has criticized Australia’s decision to review the 99-year lease granted to the Chinese company Landbridge in 2015, calling it an “unfair and unethical move.”
US Debt Concerns Fuel Greenback Weakness
The US Dollar Index (DXY), which tracks the US Dollar against six major currencies, continues to decline, trading around 98.70. This weakness is attributed to growing concerns about the US fiscal deficit. US markets are closed for the Memorial Day holiday.
Moody’s recent downgrade of the US credit rating from Aaa to Aa1 further exacerbates these concerns. The agency predicts that US federal debt will rise to 134% of GDP by 2035, from 98% in 2023. This deterioration is attributed to rising debt-servicing costs, expanding entitlement programs, and declining tax revenues.
China has also criticized the US for its measures on advanced chips, calling them “unilateral bullying and protectionism” that destabilize the global semiconductor industry.
AUD/USD Technical Outlook
From a technical perspective, the AUD/USD pair is firmly in bullish territory. Daily indicators suggest the pair is poised to continue its upward trajectory.
If the pair breaks above the seven-month high at 0.6687, it could open the door for further gains. However, a decisive move below the nine-day EMA at 0.6456 could signal a shift in momentum and potentially lead to a retracement towards the 0.5914 level.
