Australian Dollar loses ground following disappointing Retail Sales data

• The Australian Dollar fell after Retail Sales came in at a 0.2% rise MoM in May, against the expected 0.4% increase.
• The AUD may regain its ground due to improved market sentiment.
• Fed's Powell highlighted the importance of gauging more data before initiating monetary policy easing.

The Australian Dollar (AUD) edges lower against the US Dollar (USD) on Wednesday following the release of weaker-than-expected domestic economic data. However, the AUD/USD pair gained ground as the US Dollar (USD) remains subdued amid rising odds of the Federal Reserve (Fed) cutting interest rates.

The Australian Bureau of Statistics (ABS) showed that Retail Sales rose 0.2% month-over-month in May, compared to a flat 0% in April (revised from -0.1%). The reading came in below the market expectations of 0.4%.

Additionally, the AUD/USD pair appreciated due to improved market sentiment, driven by the news that the US President Donald Trump's top trade officials were seeking phased tariff deals with the most engaged countries as they pushed on to reach an agreement by the July 9 deadline, when Trump had vowed to reimpose his harshest levies, per the Financial Times.

Australian Dollar declines as US Dollar halts losing streak

• The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is halting its losing streak that began on June 19 and is trading at around 96.70 at the time of writing. The US ADP Employment Change report for June will be in the spotlight later on Wednesday.
• Fed Chair Jerome Powell reiterated on Tuesday that the US central bank will wait for more data before it starts monetary policy easing, but he did not rule out a rate reduction in the July meeting.
• US Treasury Secretary Bessent said that he believes the Federal Reserve (Fed) will cut interest rates earlier than the fall, but they will definitely cut rates by September at the latest, per Fox.
• US JOLTS Job Openings rose to 7.76 million in May, compared to 7.395 million openings reported in April. This figure came in above the market expectation of 7.3 million.
• The US Senate has passed some version of President Trump's "big, beautiful budget bill", which now heads to the US House of Representatives for a final pass and another vote. Trump, who campaigned on eliminating the US's federal deficit overhang, is poised to write his spending bill into law, which will add trillions of dollars to the US debt load over the next decade.
• US President Donald Trump could weaken Fed Chair Jerome Powell's authority by announcing his preferred candidate to lead the central bank next year. Trump said that he has a list of potential Powell successors down to "three or four people," without naming the finalists. Chicago Fed President Austan Goolsbee said on Thursday that political waves are not a factor in decision-making, nor would the naming of a shadow chair, per CNBC.
• A US intelligence report indicated that US strikes on Iranian nuclear sites have set back Tehran's program by only a matter of months, per Reuters. Iranian Foreign Minister Abbas Araghchi noted that Tehran has no intention of resuming nuclear negotiations with the United States, per CNN.
• China's Caixin Manufacturing Purchasing Managers' Index improved to 50.4 in June from 48.3 in May, according to the latest data released on Tuesday. The reading surpassed the market forecast of 49.0. It is important to note that any economic change in China could impact AUD as both countries are close trade partners.
• China's NBS Manufacturing Purchasing Managers' Index (PMI) advanced to 49.7 in June, compared with 49.5 in May. The data came in line with the market consensus in the reported month. The NBS Non-Manufacturing PMI rose to 50.5 in June versus May's 50.3 and the expected 50.3 reading.
• Australia's S&P Global Manufacturing Purchasing Managers' Index (PMI) fell to 50.6 in June from the previous 51.0. The output declined to its lowest reading since February due to adequate client inventories and weaker market conditions, data showed on Tuesday.
• TD-MI Inflation Gauge edged up 0.1% month-over-month in June, reversing a 0.4% previous decline. The rise came even as both headline and underlying inflation continued to ease within the Reserve Bank of Australia's (RBA) 2-3% target range.
• Australia's Private Sector Credit climbed to 0.5% month-over-month in May, against the market expectations and the prior month's 0.7% rise. The slowdown was primarily due to a deceleration in business loans, which eased to 0.8% from 1% in April.

Australian Dollar falls to near 0.6560 after pulling back from eight-month highs

The AUD/USD pair is trading around 0.6570 on Wednesday. The daily technical analysis indicates a persistent bullish bias as the pair remains within the ascending channel pattern. The 14-day Relative Strength Index (RSI) is positioned above the 50 mark. Additionally, the pair rises above the nine-day Exponential Moving Average (EMA), indicating that short-term price momentum is stronger.

On the upside, the AUD/USD pair could rebound to the fresh eight-month high of 0.6590, which was recorded on July 1, followed by the upper boundary of the ascending channel around 0.6650.

The nine-day EMA at 0.6540 appears as the primary support. A break below this level would weaken the short-term price momentum and put downward pressure on the AUD/USD pair to test the lower boundary of the ascending channel around 0.6490, aligned with the 50-day EMA at 0.6462.

AUD/USD: Daily Chart