AUD/USD slips as US-China trade talks yield cooling in trade tensions

Trade thaw weighs on AUD/USD

AUD/USD began today's session on a weaker note, retreating from the top of its recent range following news that the United States (US) and China have found a way to quell trade tensions, which risked spiralling out of control last week.

At this point, the outcome of the trade talks is still light on details, with final approval pending from President Donald Trump and President Xi Jinping.

However, based on current information, it appears that today's agreement is built on the framework of the trade truce established in Geneva last month, with some additional 'meat on the bone'. This outcome aligns with the one we suggested in our Australia 200 afternoon report yesterday here.

Potential tariff reductions and market implications

If the two presidents review and approve the outcome of today's trade talks, it will likely include maintaining the reduction in US tariffs on Chinese goods at 30% (down from 145%) and Chinese tariffs on US goods at 10% (down from 125%).

Headlines also suggest China has agreed to provide the US access to rare earth materials and magnets in exchange for the US relaxing export controls on technologies such as semiconductors.

At the very least, this outcome will reduce some downside risks to the Chinese economy, as reflected in this week's inflation and trade data, and alleviate concerns about the growth prospects of the US economy.

Furthermore, it should temporarily remove some of the short-term uncertainty surrounding the US dollar (USD), thereby weighing on currency pairs including AUD/USD.

Economic indicators and central bank outlook

On the domestic front, the Australian dollar (AUD) faces additional pressure from underwhelming data. Last week’s disappointing  first quarter (Q1) 2025 gross domestic product (GDP) reading, coupled with a modest 0.5% rise in Westpac consumer confidence for May. Despite the Reserve Bank of Australia’s (RBA) 25 basis point (bp) interest rate cut strongly suggesting the need for further monetary policy easing.

The Australian interest rate market is pricing in a 72% chance of a 25 bp rate cut in July and a cumulative 73 bp of RBA rate cuts between now and year-end.

AUD/USD technical analysis

After completing a triangle-style 'ABCDE' five-wave correction in early April at the 0.6389 high, AUD/USD dropped to a low of 0.5912 on 9 April.

Since then, the pair springboarded back above 0.6500 in early May, leaving a V-shaped bottom in its wake, frequently seen at medium-term lows.

AUD/USD has spent the past five weeks consolidating its rebound from the April lows in a range between 0.6350 and 0.6540 - either side of the 200-day moving average (MA), currently at 0.6436.

After the current period of consolidation is completed (which may include a dip back towards the 0.6350 area), we look for AUD/USD to extend its gains towards medium-term resistance at around 0.6740. This includes the 200-week MA and the downtrend line from the 0.8007 high of February 2021.

AUD/USD daily chart

• _{Source: TradingView. The figures stated are as of 11 June 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}