AUD/USD slipped towards 0.7040 on Tuesday, struggling to hold early support from China’s May trade beat. Westpac’s Consumer Sentiment Index in Australia turned down, falling to -2.9% in June from 3.5% previously, and the pair was last near 0.7042. China reported Exports up 19.4% YoY and Imports up 27.4% YoY, while the trade surplus widened to $105.43 billion. Demand for high-tech goods, semiconductors and AI-linked products drove much of the improvement.
Even so, the stronger data failed to lift the Australian Dollar for long, as markets weighed weaker momentum in non-tech exports and a fragile outlook for China’s domestic consumption. On the 4-hour chart, AUD/USD remains below the 20- and 100-period SMAs at 0.7080 and 0.7136, keeping a bearish bias. The RSI is in the mid-30s, while resistance is seen at 0.7047 and 0.7063; support levels are 0.7041 and 0.7033.
Australian Economic Weakness and China’s Trade Picture
Given the fall in Australian consumer sentiment, we see a bearish outlook for the AUD in the near term. The drop to -2.9% suggests domestic economic pressures are mounting, which will likely weigh on the currency. This internal weakness is taking precedence over any positive news from abroad.
To support this view, we note that Australia’s latest quarterly inflation data from April showed a headline CPI of 3.6%, still stubbornly above the central bank’s target range. The Reserve Bank of Australia has held its cash rate at 4.35% for several months, and this weak sentiment reduces the chance of any further hikes. This creates a challenging environment for the Aussie dollar.
The strong Chinese trade data offers a conflicting signal, but the details are what matter to us. The surge was driven by high-tech exports, while broader domestic demand in China appears fragile, as evidenced by a recent slowdown in their Caixin Services PMI to 52.5. Historically, the AUD’s fate is tied more to China’s demand for bulk commodities, which is linked to its domestic construction and manufacturing, not just tech exports.
Divergence in US Growth and Trading Strategy
On the other side of the pair, the US economy is showing resilience. The most recent jobs report for May 2026 showed the economy added 272,000 jobs, far exceeding expectations and keeping wage growth firm. This persistent strength means the US Federal Reserve is unlikely to cut interest rates soon, creating a policy divergence that favors a stronger USD.
Considering these factors, we are looking at strategies that profit from a fall in the AUD/USD pair. Buying put options with a strike price below the key 0.7000 psychological level seems prudent. We are specifically looking at July 2026 expiry dates to give the trade time to develop over the coming weeks.
We will use the technical levels mentioned as our guide for risk management. A sustained break above the 100-period moving average around 0.7136 would signal our bearish thesis is wrong. Therefore, we might consider using bear put spreads to limit our initial cost and define our maximum risk on the position.
