AUD/USD surges to 0.6470 as soft US CPI and tariff truce lift sentiment

• AUD/USD jumps nearly 1.5% on Tuesday, rising to 0.6470 amid improving risk appetite and broad US Dollar weakness.
• Tariff truce between the US and China, alongside weak US inflation data, boosts demand for risk-sensitive Aussie.
• Australian consumer and business confidence rebounds, RBA likely to cut rates next week to support growth.
• Price breaks above 200-day EMA; next resistance at 0.6500, with further upside toward 0.6700 if momentum continues.
  
  

The Australian Dollar (AUD) is trading sharply higher against the US Dollar (USD) on Tuesday, with AUD/USD rising to 0.6470, up nearly 1.5% intraday, as a combination of improved global sentiment and softer US Consumer Price Index (CPI) data boosts demand for risk-sensitive currencies. The Aussie is extending gains after a volatile start to the week, with investors welcoming signs of de-escalation in United States (US)-China trade tensions.

Over the weekend, trade negotiators from Washington and Beijing reached a 90-day agreement to reduce tariffs, cutting US tariffs to 30% and Chinese tariffs to 10%. The breakthrough has helped ease fears of a global slowdown, offering a significant tailwind to Australia's trade-dependent economy, given its deep export ties with China.

From the US side, recent macro data revealed that headline CPI eased to 2.3% year-over-year in April--its lowest level since February 2021 and below the 2.4% forecast. On a month-over-month basis, prices rose 0.2%, rebounding from a 0.1% decline in March but undershooting the 0.3% estimate. Meanwhile, core inflation remained unchanged at 2.8%, staying at a four-year low. The data helped reduce expectations of further elevated interest rates by the Federal Reserve (Fed) in the near term, pressuring the Greenback and lifting the Aussie.

On Australia's side, the Westpac-Melbourne Institute Consumer Sentiment Index rose by 2.2% month-on-month to 92.1 in May, recovering from a 6% drop in April and marking the third monthly increase this year. Meanwhile, the National Australia Bank (NAB) Business Confidence Index rose to -1 in April from -3 in March, signaling a slight pickup in corporate sentiment despite remaining in negative territory.

Still, the Reserve Bank of Australia (RBA) is widely expected to cut interest rates by 25 basis points at its upcoming meeting as policymakers continue efforts to support economic growth in a fragile global environment.

Technical analysis: AUD/USD rallies to 0.6470, key resistance at 0.6500 in sight

From a technical perspective, AUD/USD has broken above the 200-day Exponential Moving Average (EMA) after holding firm at short-term support near 0.6360, which aligns with last week's low.

The next resistance lies at 0.6500, near the previous week's high. A break above this level would expose the 0.6700 psychological handle last seen in November 2024. On the downside, immediate support is seen at 0.6360, a level that has offered support multiple times in recent sessions, followed by the 50-day EMA at 0.6348, likely towards 0.6200 if downside pressure resumes.

The Relative Strength Index (RSI) is currently at 58.70 and pointing upward, suggesting that bullish momentum is gaining strength.