The Australian dollar is under pressure as trade tensions escalate, and expectations grow for rate cuts by the Reserve Bank of Australia. This market update explores what’s driving the shift in sentiment and what technical signals suggest for the Aussie’s next move.

AUD slips as global risk appetite weakens

The Australian dollar came under renewed pressure on Thursday, slipping below the $0.649 threshold as global risk appetite weakened and market expectations for a Reserve Bank of Australia (RBA) interest rate cut intensified.

The currency reached an intraday low of $0.64838 before staging a modest recovery to trade around $0.65052. This decline erased gains from Wednesday’s temporary rally to $0.65459.

Investor caution rose sharply following heightened trade war rhetoric from US President Donald Trump, who signalled that formal tariff notices would soon be issued to key trading partners.

These proposed measures, expected within the next fortnight, are designed to prompt new trade negotiations through unilateral tariffs.

In response, markets pivoted away from risk-sensitive assets, driving declines in equities, commodities, and the Australian dollar — a currency often seen as a barometer of global trade sentiment.

Rate cut bets grow as RBA meeting nears

This renewed wave of protectionism arrives at a time when Australia is already contending with a subdued economic outlook.

Market participants are now assigning an 80% probability that the RBA will lower its cash rate by 25 basis points to 3.60% at its upcoming policy meeting on 8 July.

Projections for further easing have also gained traction, with rates potentially falling to 3.10% by the end of 2025.

Westpac’s Chief Economist, Luci Ellis, suggests the central bank may adopt a more gradual approach. She expects a pause in July, followed by rate reductions in August and November.

Additional cuts are forecast in February and May 2026, which could bring the cash rate down to 2.85%.

However, Ellis noted that a faster decline in inflation or a deterioration in employment conditions could prompt earlier action by the RBA.

Technical analysis: AUD/USD holds key support

On the technical front, AUD/USD found strong buying interest near the 0.64838 level, triggering a swift rebound.

A bullish MACD crossover and strengthening histogram momentum confirmed the recovery, with price action reclaiming the psychological 0.6500 handle.

The pair moved back above short-term moving averages, reinforcing the view of renewed bullish interest. Immediate resistance lies near the 0.6510 mark, and a clear break above this level could open the door to further upside.

Conversely, the 0.6480–0.6490 region now acts as a key demand zone and short-term support area. As long as the pair holds above the 30-period moving average, momentum is expected to remain constructive.

Looking ahead, the Aussie is likely to remain volatile in response to upcoming US inflation figures and further developments in trade policy.

Any confirmation of new tariffs or dovish signals from the RBA could place additional downside pressure on the currency.

Traders will be closely monitoring macroeconomic releases and revisions to Australian data for cues on the pace and scale of future rate cuts.

Click here to open account and start trading.