The Australian Dollar (AUD) has retreated sharply from its recent four-year high against the US Dollar, pressured by disappointing domestic labor data and weak economic figures from China [1][2]. According to Commerzbank’s Volkmar Baur, the AUD had previously benefited from the Reserve Bank of Australia’s (RBA) three consecutive rate hikes, but the supportive effect of these hikes is now fading as policymakers signal a potential pause [1]. RBA Chief Economist Sarah Hunter delivered a less hawkish speech this week, and minutes from the latest monetary policy meeting indicate that the central bank is leaning toward a wait-and-see approach, allowing time for previous rate hikes to take effect [1].
The latest labor market data released early Thursday showed the Australian unemployment rate rising to 4.5% in April, its highest level since 2021, compared to expectations of a steady 4.3% [2]. This increase was driven by an unexpected decline in net employment, which fell by 18,600 jobs against an anticipated rise of 17,500 [2]. The AUD/USD pair dropped to lows near 0.7100 before rebounding slightly to 0.7126 at the time of writing, but remains well below Wednesday’s high of 0.7174 [2].
Market sentiment toward the AUD remains cautious. While the currency’s weakness is being tempered by a mild improvement in global risk sentiment—partly due to US President Donald Trump’s comments on progress toward a peace deal with Tehran—technical analysis suggests a bearish outlook for AUD/USD. The pair is forming a small triangle pattern at the lower end of its monthly range, typically a continuation pattern that could signal further downside [2]. Momentum indicators are mixed, with the Relative Strength Index (RSI) capped below 50, indicating mild bearish pressure, while the MACD has turned marginally positive, hinting at a possible attempt to rebuild bullish momentum [2].
Support for AUD/USD is seen at the uptrend line around 0.7108, with further support at 0.7080 and 0.7030. Resistance is expected near 0.7160, 0.7174, and 0.7185, with a previous support area at 0.7215 likely to challenge any rallies [2]. On a broader basis, the AUD was the weakest major currency on the day, falling 0.38% against the USD and showing declines against all other major currencies except the New Zealand Dollar [2].
Analysts warn that if the RBA’s rate-hiking cycle is indeed over, support for the AUD could diminish further, putting the currency under additional pressure in the coming months [1].
CONCLUSION
The Australian Dollar’s recent gains have been undermined by weak labor data and growing expectations that the RBA will pause its rate hikes. With the unemployment rate rising and technical indicators pointing to further downside, the AUD faces significant headwinds. Market participants are likely to remain cautious until clearer signs of economic recovery or a shift in RBA policy emerge.