AUD/USD posts its highest weekly close since November 2024

The AUD/USD finished higher last week at 0.6531, up 1.27%, marking its highest weekly close since November 2024.

Fed chair succession fuels US dollar weakness 

Last week’s gains in AUD/USD were driven by broad United States (US) dollar (USD) weakness, following softer US economic data and dovish commentary from the Federal Reserve (Fed), which bolstered expectations, including our own, that the Fed may cut interest rates earlier and more deeply than anticipated in the second half (H2) of this year.

The decline in USD was also fuelled by speculation that US President Donald Trump may announce Fed Chair Jerome Powell’s successor in the summer - a highly unusual move given that the Fed Chair’s term does not expire until May 2026.

Trump's choice to replace Powell, when it comes, is expected to align with his agenda of lowering interest rates. An earlier move would raise questions about the Fed’s independence, which could undermine confidence in both the Fed and USD.

Upcoming data to influence AUD/USD

How AUD/USD performs this week will likely depend on Wednesday’s Australian retail sales report, as well as Thursday’s US labour market update (non-farm payrolls), before the 4 July holiday long weekend.

The expectation is for the US economy to add 110,000 jobs in June, with the unemployment rate ticking up to 4.3% from 4.2%. Following last week’s narrowing in the labour market spread within the Consumer Confidence reading and the rise in continuing claims to a fresh record high, there is a non-negligible chance of the unemployment rate rising this week to 4.4%.

This would spark urgent calls for a clearer dovish pivot from the Fed, which in turn would see USD take another leg lower.

Retail sales

Date: Wednesday, 2 July at 11.30am AEST

Wednesday's retail sales report for May is the last piece of important domestic data that the Reserve Bank of Australia (RBA) will receive before its 8 July Board meeting.

While it’s unlikely to alter market expectations away from an RBA rate cut next week - especially after last week’s soft inflation data - it could reinforce the case for a cut, particularly if retail sales decline again following the -0.1% dip in April.

To recap the key takeaways from last week’s inflation release:

• The monthly headline consumer price index (CPI) indicator for May rose by 2.1% year-over-year (YoY), easing from 2.4% in April
• Annual trimmed mean inflation dropped to 2.4% YoY in May from 2.8%, marking the lowest rate since November 2021.

Both key inflation readings dropped below the midpoint of the RBA’s 2% – 3% target band, as well as below the RBA’s forecast of 2.6% for June 2025.

With the deflationary trend becoming more apparent, alongside the tepid growth trajectory of the Australian economy, this reinforces our own call for the RBA to further loosen monetary policy and cut rates by 25 basis points (bp) to 3.60% at its Board meeting in two weeks' time (8 July).

The preliminary expectation for the retail sales report is for a rise of 0.3% month-over-month (MoM). The Australian interest rate market is pricing in 23 bp of rate cuts for 8 July and a cumulative 83 bp of RBA rate cuts between now and the end of the year.

AU retail sales MoM chart

AUD/USD technical analysis

AUD/USD has spent the past two months trading in a range between support at 0.6370 – 0.6350 and resistance at 0.6550 – 0.6570, consolidating its rebound from the April low of 0.5912.

Last week, AUD/USD tested both the lower bound (a low of 0.6372) and the upper bound (a high of 0.6563) of its range extremes, with both holding firm.

After the current period of consolidation is complete (which may include another dip back towards 0.6370 – 0.6350), we look for the upward trajectory in AUD/USD to resume.

Specifically, a sustained break above resistance at 0.6565 – 0.6575 would indicate the next leg higher has commenced towards medium-term resistance at 0.6725. This includes the 200-week moving average and the downtrend line drawn from the 0.8007 high of February 2021.

AUD/USD daily chart

• _{Source: TradingView. The figures stated are as of 30 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.}