AUD/USD edges higher as EU-US trade tensions, Fed independence and RBA Minutes come into focus

• AUD/USD edges higher as RBA Minutes receive focus.
• EU-US trade tensions pressure the US Dollar as political pressure on the Fed increases.
• AUD/USD technical analysis: Uptrend holds within a rising wedge, above key moving averages.

The Australian Dollar (AUD) is extending its gains against the US Dollar (USD) on Monday as EU-US trade tensions escalate and concerns over the independence of the Federal Reserve (Fed) rise.

At the time of writing, AUD/USD is trading above 0.6520 as focus shifts to the release of the Minutes from the July Reserve Bank of Australia's policy meeting.

RBA Minutes in focus as markets look for clues on potential size of August rate cut

The Reserve Bank of Australia (RBA) is set to release the Minutes from its July policy meeting on Tuesday, the meeting at which it surprised markets by holding the cash rate steady at 3.85%.

The Minutes will offer deeper insight into the central bank's decision-making process, including differing views among policymakers and their assessment of the inflation and growth outlook.

With inflation still elevated and economic momentum showing signs of strain, markets have turned their attention to the August meeting, where a rate cut is widely anticipated. A 25-basis-point reduction is mostly priced in, but growing speculation around a more aggressive 50-basis-point cut could shift sentiment. If expectations for a larger cut gain traction, the widening yield differential may lend support to the US Dollar against the Australian Dollar.

EU-US trade tensions pressure US Dollar as political pressure on Fed increases

Meanwhile, escalating trade tensions between the European Union (EU) and the United States (US) are adding pressure to the US Dollar. President Trump has signaled that even if a trade agreement is reached, the EU could still face a broad-based tariff ranging between 15% and 20% on a wide array of exports to the US.

These proposed tariffs would be in addition to the current sector-specific levies, which include a 25% duty on autos and auto parts, as well as a 50% tariff on steel and aluminum. Trump has also suggested that industries such as pharmaceuticals and semiconductors may soon face substantial fees.

This tariff rhetoric has stirred concerns within the Fed, which remains cautious about adjusting interest rates before the full inflationary impact of trade policy becomes clear. However, questions around Fed independence have introduced a fresh layer of uncertainty. Speaking to CNBC on Monday, Treasury Secretary Scott Bessent suggested that it might be time to reevaluate the institution itself, questioning whether it has been effective in fulfilling its mandate.

Despite political pressure on the Fed to ease monetary policy, market expectations remain mixed. According to the CME FedWatch Tool, there is currently a 56.2% probability of a 0.25% rate cut at the September meeting, while the odds of holding rates steady have risen to 42.3%.

AUD/USD technical analysis: Uptrend holds within a rising wedge, above key moving averages

The AUD/USD daily chart indicates that the uptrend currently remains intact, supported by a recent Golden Cross. 

This forms when the 50-day Exponential Moving Average (EMA) crosses above the 200-day EMA, signaling upward momentum. 

Price action is currently moving within a rising wedge pattern, which has recently provided support and resistance for the pair.

Prices currently remain supported by both the 50-day EMA near 0.6492 and the 200-day EMA at 0.6444, reinforcing near-term bullish sentiment. 

AUD/USD daily chart

Key resistance lies at the 61.8% Fibonacci retracement level of the September-April decline around 0.6550. 

Further upside targets at the psychological level of 0.6600 and the November high around 0.6688. 

On the downside, strong support is at the 50% Fibonacci level at 0.6428, which aligns closely with the wedge's lower boundary. 

A break below this area could shift momentum bearish, especially if price falls under the 200-day EMA. 

The Relative Strength Index (RSI) is currently neutral at 51, indicating a lack of strong momentum in either direction.