AUD/USD fell on Tuesday despite Australian factors being broadly steady. Westpac Consumer Confidence rose +3.5% in May after a -12.5% fall in April, and the latest RBA Meeting Minutes did not shift expectations for the next policy move.
The pair moved below the 50-day EMA, which had supported pullbacks since April’s rebound, as the US Dollar stayed firm. The drop briefly pushed below 0.71, and the break leaves room for a move towards 0.70, where there is limited support on the daily chart.
Focus Shifts To China Decision
Attention turns to Wednesday’s People’s Bank of China decision, with expectations for the one-year Loan Prime Rate to stay at 3%. Any sign of further easing could pressure CNH and pull AUD/USD lower, while local PMIs are also due, with prior readings just above the expansion line on all three measures.
Thursday brings Australian Employment Change, forecast at 17.5K, and an Unemployment Rate expected to hold at 4.3%, plus May Consumer Inflation Expectations. External releases include FOMC Minutes on Wednesday and US flash PMIs on Thursday, while the 200-day EMA is back in view for the medium-term trend.
Looking back to this time in 2025, we saw the Aussie dollar break a key technical level primarily due to broad strength in the US dollar. That break below the 50-day moving average near 0.71 opened up a move toward the 0.70 handle. Fast forward to today, May 20, 2026, and we are in a different price environment, with the AUD/USD trading much lower around 0.6650.
The distinction between domestic and external drivers remains critical. While last week’s slightly softer US Consumer Price Index (CPI) reading of 3.4% has capped the US dollar’s strength for now, the Federal Reserve remains cautious about cutting rates. This means any Aussie strength is vulnerable to a reversal if US data surprises to the upside, a dynamic we also saw play out last year.
Domestic Signals And Market Tension
On the domestic front, the picture is more conflicted than it was in 2025. The Reserve Bank of Australia’s minutes, released just yesterday, showed that the board actively considered another interest rate hike due to persistent inflation. However, this hawkish stance is challenged by last week’s jobs report, which saw the unemployment rate tick up to 4.1%, suggesting the labor market is finally loosening.
The influence from China, a key focus in 2025, continues to weigh on the Aussie. Recent data showed China’s industrial output was strong, but retail sales disappointed, painting a picture of an uneven economic recovery. This uncertainty acts as a drag on the Australian dollar, much as concerns about potential PBoC easing did a year ago.
For derivative traders, this conflict between a hawkish RBA and weakening economic indicators suggests volatility is the main trade. Buying options straddles or strangles could be a viable strategy to profit from a significant price move, regardless of direction, once either the inflation or growth narrative wins out. Key levels to watch are the recent highs near 0.6700 acting as resistance and the 0.6600 level providing initial support.
The setup for the coming weeks is about identifying the catalyst that breaks the current deadlock. Unlike in 2025 when the market seemed to want to sell the Aussie, today we are caught between a central bank threatening hikes and data suggesting it shouldn’t. We will be watching upcoming US inflation data and Australian retail sales to see which side of the argument gains more ground.
