Australian Dollar trades near 2025 high as risk sentiment, resilient data boosts gains

• AUD/USD bulls take a breather as triangle resistance caps gains at YTD high.
• Resilient PMI data and hawkish RBA comments drive AUD/USD to eight-month highs as risk sentiment firms.
• The US Dollar remains under pressure despite lower-than-expected Initial Jobless Claims and steady yields.

The Australian Dollar (AUD) is pulling back after hitting an eight-month high against the US Dollar (USD) on Thursday. The pair reached a session high of 0.6625 before easing to trade near 0.6596 at the time of writing.

The retreat follows a strong rally driven by upbeat economic data and improving global risk sentiment. As the pair approached key resistance, profit-taking and fading momentum triggered the pullback.

The rally was fueled by signs of economic resilience in Australia. The preliminary Composite Purchasing Managers Index (PMI), released on Wednesday, rose to 53.6 in July, the highest in over two years. The index tracks activity in services and manufacturing, showing broad-based expansion. Strong domestic demand and a rebound in industrial output supported the result. The data reduced expectations for near-term rate cuts by the Reserve Bank of Australia (RBA).

AUD/USD rises on strong domestic data, steady RBA outlook, and shifting US Dollar dynamics

Reinforcing this outlook, RBA Governor Michele Bullock stated that while rates remain on hold at 3.85%, Australia's interest rate cycle may prove shallower than in other advanced economies. Her balanced message underscored the central bank's commitment to reducing inflation without undermining employment, thereby strengthening investor confidence in the AUD's fundamental backdrop.

Her balanced message emphasized the need for inflation control without significantly harming the labor market, thereby bolstering confidence in the currency's long-term fundamentals.

US data released Thursday also reflected economic resiliency. Initial Jobless Claims came in at 217,000, below forecasts, suggesting that the labour market remains robust. The S&P Global US Composite PMI rose to 54.6, the fastest pace in over a year, despite a disappointing Manufacturing PMI reading. While US economic data remains robust, the US Dollar has shown signs of fatigue amid growing political scrutiny of the Federal Reserve (Fed) and growing expectations that rates will be lowered this year.

This environment has narrowed the interest rate differential with the AUD, making it more attractive to investors seeking returns.

Externally, global risk sentiment has improved, particularly as concerns around major trade disputes have eased.

AUD/USD bulls take a breather as triangle resistance caps gains at YTD high

AUD/USD is retreating after failing to hold above the key resistance zone near 0.6600-0.6625. This area includes the upper boundary of a rising wedge pattern and marks the highest level since November 2024. The pullback suggests hesitation from buyers as momentum slows.

The Relative Strength Index (RSI) has eased slightly, now hovering around 59, showing that while bullish momentum remains, it's losing steam. A break below immediate support at 0.6550, a prior breakout level and near the 61.8% Fibonacci retracement of the September-April decline, could open the way to 0.6500, where the 50-day Exponential Moving Average (SMA) and lower channel support converge.

On the upside, a decisive close above 0.6625 would confirm a breakout from the rising wedge and could trigger a move toward the next resistance at 0.6722, the November 2024 high. Until then, consolidation or a deeper pullback remains possible if risk appetite softens.

Technically, AUD/USD is trading within a rising channel and recently bounced off the 61.8% Fibonacci retracement level at 0.6550, maintaining a bullish structure. The Relative Strength Index (RSI) is approaching 59, indicating strong buying interest without overbought conditions. Additionally, the presence of a Golden Cross -- where the 50-day EMA crosses above the 200-day EMA -- continues to support a bullish medium-term outlook.

Key levels to monitor include resistance at 0.6600, which coincides with a psychological and structural barrier, and a higher target at 0.6722, the November 2024 high. On the downside, immediate support lies at 0.6550, with further backing from the 50-day EMA and the lower boundary of the rising channel near 0.6498. A decisive break above 0.6600 would open the door for a move toward 0.6722, while failure to hold above support could trigger a deeper pullback.