AUD/USD slips as strong US PMI data offsets fiscal jitters

• AUD/USD slips near 0.6415 as upbeat US data supports the Greenback.
• Jobless claims and PMI beat expectations, reinforcing a resilient US economy.
• Trump's tax bill revives fiscal concerns, capping broader USD gains despite strong data.

The Australian Dollar (AUD) came under renewed pressure on Thursday as the US Dollar (USD) found its footing, with risk appetite fading and broader markets tilting defensively. A firm bounce in the US Dollar Index (DXY) weighed on the AUD, pushing AUD/USD down to 0.6415, a key support level that has acted as a floor in recent sessions. At the time of writing, the pair is trading around 0.6418, hovering just above intraday lows as sellers test the resolve of near-term support.

The US Dollar is supported by strong data, but longer-term risks loom

The Aussie's pullback reflects diverging policy trajectories and economic signals. With no significant Australian data released Thursday, sentiment remains shaped by the Reserve Bank of Australia's (RBA) recent 25 basis point rate cut, which lowered the cash rate to 3.85%. Governor Michele Bullock has maintained a cautious tone, citing slowing inflation and global trade uncertainty.

In contrast, the US Dollar found support after a string of upbeat data releases. Initial Jobless Claims for the week ending May 18 came in at 227,000, below the 230,000 consensus, reinforcing a still-resilient labor market. Meanwhile, both the S&P Global US Manufacturing PMI (May, Preliminary) and Services PMI (May, Preliminary) printed at 52.3, comfortably above the 50-mark that separates contraction from expansion. The data surprised to the upside, indicating a pickup in both factory and service sector activity.

However, sentiment around the Greenback remains mixed due to broader fiscal concerns. Investors are still digesting President Donald Trump's "One Big Beautiful Bill", which passed the House earlier this week. The bill proposes extending the 2017 tax cuts while reducing spending on key welfare programs. Though some see near-term stimulus potential, the legislation is expected to add over $3.8 trillion to the federal deficit in the coming decade. This has intensified concerns around US debt sustainability and credit quality, especially following recent rating downgrades. These structural concerns are limiting the Dollar's upside, even in the face of positive near-term data.

AUD/USD stalls under resistance, eyes a breakdown below 0.6415

Technically, AUD/USD is clinging to a fragile support zone near 0.6415, with recent price action showing a clear lack of conviction from bulls. 

The pair has been unable to break convincingly above the 0.6420-0.6450 range, which aligns with both the 20-day Simple Moving Average (SMA) and the mid-point of the September to April decline near 0.6428.

If sellers manage to press below 0.6415, it could open the door toward the November low at 0.6338, and potentially the 0.6307 level, which marks the 38.2% Fib retracement of the October-April rally. 

The Relative Strength Index (RSI) is hovering around 51.77, slightly above the neutral level of 50. 

AUD/USD daily chart