AUD/USD Breaks Higher on Risk Optimism, US Fiscal Fears

Economic

Summary:

The Australian Dollar surged to fresh year-to-date highs near 0.6590 on Tuesday, fueled by strong Chinese manufacturing data and growing headwinds for the US Dollar, including debt concerns, Fed rate cut speculation, and trade deal uncertainty.

BUY AUDUSD

Close Time

CLOSED

0.65750

Entry Price

0.68000

0.65000

0.66430 +0.00047 +0.07%

75.0

Pips

Loss

0.65000

Exit Price

0.65750

Entry Price

0.68000

The Australian Dollar (AUD) extended its rally on Tuesday, climbing to fresh year-to-date highs against the beleaguered US Dollar (USD) and reversing earlier losses amid a backdrop of improving Chinese economic data and deepening US macroeconomic woes. The AUD/USD pair is now trading around 0.6590 — its highest level in 2024 — marking a second straight day of gains as the greenback continues to retreat.

While the Aussie’s strength has largely tracked risk sentiment and Chinese macro signals, the latest leg of this rally appears to be fueled more by USD-specific vulnerabilities. A growing chorus of investor concerns — from soaring US debt and delayed trade agreements to a dovish shift in Federal Reserve expectations — has set the stage for a broad pullback in the Dollar, which is struggling to find support even amid heightened global uncertainty.

Helping to amplify the AUD’s momentum, economic data out of China — Australia’s largest trading partner — offered a welcome surprise. Fresh figures released early Tuesday showed that Chinese manufacturing activity returned to expansion in June, confounding forecasts and marking a stark rebound from Monday’s softer NBS Purchasing Managers’ Index (PMI) data. The improvement in private-sector metrics helped restore confidence in China’s economic resilience and further cemented the Australian Dollar’s appeal as a China-proxy play.

In particular, Australian exporters — whose prospects are closely tied to Chinese demand — stand to benefit from renewed momentum in the Chinese factory sector. This cyclical tailwind has helped lift the AUD, reinforcing technical and sentiment-driven support for the currency even as broader markets remain cautious.

Meanwhile, the US Dollar continues to suffer under the weight of mounting macro pressures. First, fiscal policy is once again in focus as former President Donald Trump’s controversial tax package edges closer to approval. The bill, projected to add over $3.3 trillion to the national debt over the coming decade, has spooked investors already wary of America’s ballooning deficit. As a result, demand for USD-denominated assets has weakened, and yields have moved erratically as markets reprice long-term risks.

In parallel, speculation over the Federal Reserve’s rate path continues to build. Traders are now pricing in a growing probability of interest rate cuts starting in the second half of the year. Weakness in recent US economic prints, including lackluster job growth and slowing inflation, has added fuel to this narrative. But all eyes now turn to Fed Chair Jerome Powell, who is set to speak at the ECB’s central banking forum in Sintra, Portugal later today. His comments may help clarify the timing and scale of potential rate adjustments, with any dovish tone likely to reinforce selling pressure on the greenback.

Compounding these concerns is the lack of meaningful progress on trade deals as the July 9 deadline approaches. Despite negotiations, no major breakthroughs have materialized, and the threat of additional tariffs looms large. For now, investors are pricing in an increased risk premium on the Dollar, making higher-yielding, risk-sensitive currencies like the Australian Dollar more attractive by comparison.

Technical Analysis

From a technical perspective, the AUD/USD continues to exhibit bullish characteristics on the short-term chart. After briefly consolidating, the pair has regained upward traction, building on support from its 50-day exponential moving average (EMA), which remains firmly below price action.

The Relative Strength Index (RSI) had entered overbought territory during the latest leg higher but is now offloading excess froth through minor intraday pullbacks, offering bulls a chance to reload. The primary trend remains upward, and analysts see further room for appreciation if key resistance levels are broken.

Immediate upside targets include 0.6620 — a psychological and technical resistance zone — followed by a potential test of the 0.6670–0.6700 range, which served as a critical ceiling during previous rallies in late 2023. If momentum holds and Powell’s remarks lean dovish, a broader push toward 0.6750 or even 0.6800 could unfold over the coming weeks.

On the downside, initial support lies at the 9-day EMA near 0.6540, while the 50-day EMA at 0.6490 would offer deeper structural support. A break below these levels would weaken the bullish bias but remains unlikely unless US macro surprises turn significantly in favor of the Dollar.

TRADE RECOMMENDATION

BUY AUDUSD

ENTRY PRICE: 0.6575

STOP LOSS: 0.6500

TAKE PROFIT: 0.6800

Risk Warnings and Disclaimers

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Eva Chen

Forex

Economic

Summary:

Japan's Final Manufacturing PMI Prints at 50.1 Amid Fragile Demand; BoJ Tankan Shows Economic Resilience, Keeps 2025 Rate Hike Option Alive.

BUY USDJPY

Close Time

CLOSED

142.888

Entry Price

147.410

141.500

155.225 -0.120 -0.08%

85.6

Pips

Profit

141.500

143.744

Exit Price

142.888

Entry Price

147.410

Fundamentals

Japan's final manufacturing PMI for June came in at 50.1, up from May's 49.4. Despite increases in production and employment, underlying demand remains weak.

Annabel Fiddes of S&P Global notes that companies reported continued declines in domestic and overseas sales, reflecting the ongoing impact of global uncertainties, particularly US tariff policies.

Despite the weak demand, business confidence has improved, encouraging firms to boost output and hiring. However, Fiddes emphasized that "sustained improvement in consumer demand" is still needed to drive a broader economic recovery.

Price pressures have also "edged up," with input costs and selling prices both above long-term averages, indicating that inflation risks remain present in the supply chain.

Moreover, Japan's Q2 Tankan survey revealed that the overall index for large manufacturers stood at +13, exceeding the expected 10 and reaching the highest level since December 2024. Their forward-looking outlook for September was +12, also surpassing the expected 9. The service sector, however, showed a more mixed performance. The large non-manufacturing index remained stable at +34, in line with expectations, but this was a decline from previous readings, with the September outlook dropping to +27.

Nevertheless, capital expenditure plans surprisingly rose: large firms anticipate an 11.5% increase in capital spending for the 2025/26 fiscal year (expected at 10.0%), while small firms were slightly less pessimistic than expected. Investment data indicates a growing market confidence in the domestic economic recovery.

Inflation expectations have remained largely stable. Firms expect the CPI to rise by 2.4% over the next year and three years, unchanged from the last survey and slightly lower.

Despite escalating trade tensions, business confidence has remained robust. Although today's Tankan results are unlikely to trigger an immediate market reaction, they leave room for the BOJ to adjust its rate hike policy by year-end, especially as trade risks stabilize.

From 50.1 to +13 – Assessing Japan's Manufacturing PMI and Tankan Impact on Markets_1

Technical Analysis

The outlook for USDJPY remains unchanged as range trading persists. The intraday trend maintains a neutral stance.

On the upside, if USDJPY can hold the resistance level at 148.01, it will reignite the rally from 139.87 and break through the 61.8% retracement of the 158.86 to 139.87 decline, which is at 151.22. However, a break above 142.10 would signal further downside movement, with the pair potentially retesting the low at 139.87.

With the completion of the head-and-shoulders top pattern on the daily chart structure, the market is poised for a significant rebound.

Trading Recommendations

Trading Direction: Buy

Entry Price: 142.76

Target Price: 147.41

Stop Loss: 141.50

Deadline: July 16, 2025, 23:55:00

Support: 142.78/142.53/142.12

Resistance: 143.54/144.51/144.96

Risk Warnings and Disclaimers

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Manuel

Political

Economic

Summary:

Should the price find support here, a new bullish impulse could begin, potentially targeting the 1.3780 area, where the price has encountered resistance on previous occasions.

BUY USDCAD

Close Time

CLOSED

1.35897

Entry Price

1.37800

1.35000

1.38207 +0.00060 +0.04%

49.8

Pips

Profit

1.35000

1.36395

Exit Price

1.35897

Entry Price

1.37800

On Monday, White House Economic Advisor Kevin Hassett announced that the U.S. would immediately begin trade discussions with Canada after the latter removed its digital services tax, which was targeted at U.S. tech companies. Canada had suspended its plan to begin collecting the new tax just hours before it was set to take effect, in a bid to move forward in stalled trade negotiations with the U.S.

The Canadian Ministry of Finance confirmed that Prime Minister Mark Carney and U.S. President Donald Trump would resume trade talks with the goal of reaching an agreement by July 21. This positive development in trade negotiations provides some support for the Canadian dollar (CAD) and poses a headwind for the currency pair.

Meanwhile, crude oil prices faced pressure as investors weighed the easing of risks in the Middle East against the outlook for a possible increase in OPEC+ production in August. This, in turn, could put downward pressure on the commodity-linked Loonie, limiting further declines in the pair.

If Trump's "One Big Beautiful Bill" is ultimately passed, it is expected to add approximately $3.8 trillion to the U.S. federal deficit. Such a significant expansion of fiscal imbalance could weigh further on the U.S. dollar and potentially boost demand for gold as a safe-haven asset.

In terms of data, the ISM Manufacturing PMI for June is forecast to rise slightly from 48.5 to 48.8, suggesting a marginal improvement in factory activity. Additionally, the ADP employment report is projected to show a rebound in private-sector job creation, with 85,000 jobs added compared to 37,000 in the previous month.

However, attention will soon turn to Friday’s highly anticipated Non-Farm Payrolls (NFP) report. Expectations are for a slowdown in hiring, with estimates suggesting the U.S. economy added only 110,000 jobs in June, down from 139,000 in May. The unemployment rate is expected to rise from 4.2% to 4.3%, reinforcing the narrative of a cooling labor market. Upward Correction Possible for USDCAD as Key Levels Are Tested_1

Upward Correction Possible for USDCAD as Key Levels Are Tested_1

Technical Analysis

USDCAD has recently pulled back, once again testing support at the 1.3590 level. This price zone had previously triggered an upward movement, and there is potential for another bullish reaction if it proves to be a significant support area once again. Should the price find support here, a new bullish impulse could begin, potentially targeting the 1.3780 area, where the price has encountered resistance on previous occasions.

Meanwhile, the 100-period and 200-period moving averages are situated at 1.3997 and 1.4032, respectively, on the daily chart. This confluence of moving averages could suggest that the price might correct upwards to meet these averages in the medium term. Therefore, an upward correction seems imminent. However, a strong break below the local low of 1.3548 would signal a bearish continuation, potentially triggering a new downward momentum for the pair.

Trading Recommendations

Trading direction: Buy

Entry price: 1.3590

Target price: 1.3780

Stop loss: 1.3500

Validity: Jul 10, 2025 15:00:00

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

The breakout followed a strong rebound from the 200-period moving average on the 30-minute chart, which held firm at 1.3576.

BUY GBPUSD

Close Time

CLOSED

1.37197

Entry Price

1.37700

1.36950

1.33296 -0.00016 -0.01%

16.3

Pips

Profit

1.36950

1.37360

Exit Price

1.37197

Entry Price

1.37700

U.S. Treasury Secretary Scott Bessent expressed confidence that the “One Big Beautiful Bill” will move forward in the coming hours. This piece of legislation, which narrowly passed the Senate over the weekend, calls for a comprehensive overhaul of the tax code. Key provisions include wide-reaching deductions financed by cuts to Medicaid and green energy programs.

Should this bill be approved, it is expected to increase the federal deficit by $3.8 trillion, potentially exerting downward pressure on the U.S. dollar and fueling further demand for gold as a hedge against fiscal instability.

On the economic front, the ISM Manufacturing PMI for June is forecast to rise slightly from 48.5 to 48.8, suggesting a modest rebound in the manufacturing sector. Additionally, the ADP employment report is expected to show a strong recovery in private-sector job creation, with 85,000 jobs added compared to 37,000 in the previous month.

However, the more critical Non-Farm Payrolls (NFP) report, due later this week, is expected to show signs of a cooling labor market. Estimates suggest that the U.S. economy added only 110,000 jobs in June, down from 139,000 in May. The unemployment rate is forecast to tick up from 4.2% to 4.3%, further supporting the narrative of slowing economic momentum.

Meanwhile, a key trade agreement between the U.S. and the U.K. went into effect on Monday, leading to a reduction in U.S. tariffs on certain U.K. industrial goods, which could help improve trade relations between the two nations.

On the U.K. economic front, GDP data released earlier on Monday showed that the British economy grew by 0.7% in Q1, matching preliminary estimates and marking the strongest quarterly growth in a year. On a year-over-year basis, GDP increased by 1.3%, in line with the initial estimate and unchanged from Q4 2024.

However, a closer look at the underlying data reveals some concerning trends. Real household disposable income fell by 1.0%, the largest drop since early 2023, as rising prices and tax burdens eroded consumer purchasing power. Household savings also slipped to 10.9% from 12.0%, suggesting that consumers are increasingly relying on their savings to sustain spending.

Adding to the cautious sentiment, the U.K.’s current account deficit widened to £23.46 billion in Q1, up from £21.03 billion in the previous quarter and significantly exceeding market expectations of a £19.7 billion gap. Bullish Momentum May Continue After Trendline Break_1

Bullish Momentum May Continue After Trendline Break_1

Technical Analysis

GBP/USD recently broke through a bearish trendline, a move that could spark a bullish impulse toward the local high of 1.3769 reached on June 26. This level now stands as the next key resistance zone. The breakout followed a strong rebound from the 200-period moving average on the 30-minute chart, which held firm at 1.3576. The price reversed from this support zone and headed towards the trendline, while the 100-period moving average surged higher, signaling potential for a strong upward move.

With the RSI currently at 62, indicating a move toward overbought conditions, there may be a retest of the broken trendline, which could now act as support after previously serving as resistance. Such a retest would help confirm the development of a strong bullish trend. On the other hand, if the price fails to hold above the trendline and breaks decisively below it, the bearish sentiment could resume, suggesting that the downtrend in GBP/USD remains intact.

Trading Recommendations

Trading direction: Buy

Entry price: 1.3720

Target price: 1.3770

Stop loss: 1.3695

Validity: Jul 10, 2025 15:00:00

Risk Warnings and Disclaimers

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Eva Chen

Economic

Commodity

Summary:

Gold slid to $2,427 per ounce on Monday, testing its monthly low, as easing geopolitical tensions and rising optimism over global trade curbed safe-haven flows. Despite the near-term correction, we retain a constructive view on gold’s medium- and longer-term trajectory.

BUY XAUUSD

EXP

EXPIRED

3270.00

Entry Price

3393.00

3230.00

4217.45 +19.54 +0.47%

Pips

EXPIRED

3230.00

3328.74

Exit Price

3270.00

Entry Price

3393.00

Fundamentals

Gold prices rebounded in a corrective move on Tuesday after touching a low of $3,247 per ounce in the previous session, as fragile but still-holding ceasefire agreements in the Middle East eased fears of renewed regional conflict escalation. Meanwhile, mounting optimism surrounding a potential U.S.-China trade deal—highlighted by President Donald Trump’s positive signals last week—dented safe-haven demand, weighing on the precious metal.

Although gold has retreated modestly from record highs amid growing expectations that the most acute phase of the trade war may be nearing its end, we remain constructive on its long-term value proposition.

YTD in 2025, gold has emerged as the top performer among global asset classes. Central bank buying and ETF inflows have been key drivers, with European Central Bank data showing gold has surpassed the euro to become the world’s second-largest reserve asset after the U.S. dollar.

We believe a confluence of factors—including declining real rates, a weaker dollar, elevated geopolitical risk premiums, and a structural shift toward institutional accumulation—will continue to underpin gold prices. For instance, World Gold Council data reveals that central banks have purchased an average of over 1,000 tons annually in the past three years—more than double the decade-long average—underscoring the metal’s enduring appeal as a strategic reserve asset.

Safe-Haven Demand Ebb Drags Gold Lower, Yet Medium- and Long-Term Upside Intact_1

Technical Analysis

Gold is navigating a transitional regime where traditional correlations are being stress-tested. The interplay of easing geopolitical risk, sustained growth optimism, and expectations of prolonged monetary easing has created a complex backdrop for investors.

Price action hinges on whether risk-on sentiment persists or if renewed concerns over sticky inflation, geopolitical flare-ups, or economic uncertainty rekindle safe-haven bids. For now, gold is in a wait-and-see mode. The next decisive move will reflect which narrative ultimately dominates broader market sentiment. Based on momentum dynamics, we favor a long bias for July, with a tactical entry window on dips.

Trading Recommendations

Trading Direction: Buy

Entry Price: 3270

Target Price: 3393

Stop Loss: 3230

Valid Until: July 15, 2025, 23:55:00

Support: 3258/3247/3232

Resistance: 3247/3301/3321

Risk Warnings and Disclaimers

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Warren Takunda

Commodity

Summary:

WTI crude oil prices edge higher from recent lows but remain significantly below last week's peak, as market expectations for increased OPEC+ supply and slowing global demand weigh on sentiment.

SELL WTI

EXP

EXPIRED

64.000

Entry Price

57.000

66.000

59.991 +0.182 +0.30%

Pips

EXPIRED

57.000

67.535

Exit Price

64.000

Entry Price

66.000

West Texas Intermediate (WTI) crude oil prices showed modest signs of recovery on Monday, climbing slightly from two-week lows. However, any meaningful rebound remains elusive as futures hover near $65 per barrel—still roughly $12 below last Monday’s highs—amid a confluence of bearish macroeconomic and geopolitical developments. The subdued recovery is emblematic of broader market apprehension, as traders digest fresh data pointing to a softening global economy and rising expectations that OPEC+ will move ahead with another supply hike this week.

Prices have largely been range-bound in recent sessions, with the $66.00 level acting as a short-term ceiling. This technical resistance is proving difficult to breach, and with bearish structural forces gathering momentum, the outlook for crude remains cautious at best.

One of the key factors keeping oil bulls at bay is the anticipation of another production increase from the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+. Market sources indicate that the group is likely to proceed with a fourth consecutive monthly hike, adding another 411,000 barrels per day to global supply. While this strategy is part of a gradual unwinding of pandemic-era production cuts, the timing has raised eyebrows given the broader economic backdrop.

Indeed, demand-side indicators continue to flash warning signs. China’s National Bureau of Statistics reported that the country’s official manufacturing PMI contracted for a third straight month in June, reflecting deepening weakness in factory output and domestic demand. This contraction is particularly significant, given that China remains the world’s largest oil importer. The PMI data, coupled with a murky trade environment and lackluster export orders, suggests that Chinese crude demand may continue to underperform in the near term.

In the United States, the economy unexpectedly shrank in Q1, and although some indicators have since stabilized, uncertainty around consumer demand and industrial activity remains high. Meanwhile, the Eurozone continues to grapple with stagflationary pressures, with industrial output in key economies like Germany and France showing signs of fatigue. Together, these factors paint a picture of a sluggish global economy, ill-suited to absorb additional barrels coming onto the market.

Further limiting the upside for crude is the apparent de-escalation of tensions in the Middle East. U.S. President Donald Trump announced over the weekend that a ceasefire agreement between Israel and Iran had been reached, bringing a tentative end to a 12-day conflict that had briefly raised concerns over a broader regional war and potential supply disruptions.

While geopolitical risk premiums had spiked during the height of the conflict—especially given Iran’s strategic position near the Strait of Hormuz, a critical artery for global oil shipments—the easing of tensions has removed a key source of support for oil prices. That said, skepticism remains. A U.S. intelligence report cited by Reuters noted that recent American strikes on Iranian nuclear sites only marginally set back Tehran’s program. Iranian officials have also signaled that the country’s nuclear efforts remain intact, underscoring that the situation could re-escalate quickly.

Still, for now, the market appears to be pricing in a stable geopolitical environment, diminishing the need for risk hedging via oil futures.

In a separate development that underscores the fragile state of the broader energy sector, Prax Group’s holding company, State Oil, has reportedly entered administration. According to multiple market sources, the company—which owns oilfields in the Shetland Islands and operates hundreds of petrol stations across the United Kingdom—was forced to take the step after accumulating unsustainable losses. An official announcement is expected later on Monday.

This development, while isolated, highlights how high operational costs, narrowing margins, and shifting market dynamics are impacting even vertically integrated players in the oil value chain.

Technical Analysis

From a technical standpoint, WTI crude is currently locked in a narrow consolidation range. Despite attempts to stabilize around $65.00, the broader bias remains to the downside. Price action continues to occur below the 50-period Exponential Moving Average (EMA), signaling ongoing bearish pressure. Furthermore, the current pattern appears to be forming a distribution phase, with traders awaiting a breakout that could define the next directional move.

A key support level lies at $64.00, and a confirmed break below this threshold would likely trigger a retest of $62.00, followed by deeper targets at $60.00 and $57.00. These levels coincide with prior consolidation zones and Fibonacci retracement levels, offering potential checkpoints for bearish momentum.

Traders with a short bias are reportedly positioning around these technical levels. As of Monday, some are entering short positions at $64.00, targeting a move down toward $57.00 over the coming sessions, provided fundamental headwinds continue to outweigh geopolitical tailwinds.

TRADE RECOMMENDATION

SELL WTI

ENTRY PRICE: 64.00

STOP LOSS: 66.00

TAKE PROFIT: 57.00

Risk Warnings and Disclaimers

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Eva Chen

Forex

Economic

Summary:

The dollar is under pressure amid concerns over Federal Reserve independence and ballooning U.S. fiscal deficits. While a technical rebound has emerged, resistance remains formidable, with analysts projecting further downside.

BUY USDX

Close Time

CLOSED

96.500

Entry Price

100.200

94.600

98.810 -0.140 -0.14%

67.0

Pips

Profit

94.600

97.170

Exit Price

96.500

Entry Price

100.200

Fundamentals

The U.S. Dollar Index (USDX) rebounded modestly from three-year lows on Monday but remains below the 97.50 threshold, reflecting persistent weakness. The index has shed nearly 12% from its 2025 peak, marking its lowest level since 2022. Morgan Stanley strategists forecast an additional 9% decline, citing eroding confidence in Fed autonomy and escalating sovereign debt risks.

Reports indicate former President Trump is evaluating candidates to replace Fed Chair Powell, whose term expires in 2026. Leading contenders include Scott Bessent, Kevin Hassett, and Kevin Warsh. In a Fox News interview, Trump advocated for interest rates to fall to 1–2%, signaling potential political pressure on monetary policy.

Market Observations: Analysts warn that diminished policy independence and record deficit spending will likely anchor the dollar in a protracted downtrend. Trump’s proposed “big, beautiful” tax-cut bill, advancing in the Senate, could add $3–4 trillion to U.S. debt over the next decade. This has reignited concerns about fiscal sustainability, further clouding the dollar’s outlook.

Policy Interventions and Surging Deficit Weigh on Dollar’s Medium-Term Outlook_1

Technical Analysis

From the daily chart perspective, the US Dollar Index (DXY) remains entrenched in a descending channel that has persisted since April 2024, with upside momentum capped and the broader bearish structure intact. The recent tepid rebound has been consistently constrained by structural resistance between 97.60–98.00, limiting further upside potential.

Momentum Analysis: The MACD indicator remains weak below the zero line, with the signal line flattening slightly, indicating that bearish momentum has yet to intensify but the overall structure remains tilted to the downside. The Relative Strength Index (RSI) hovers between 40-45, signaling neither oversold conditions nor sufficient rebound strength, reinforcing the bearish bias.

The USDX is consolidating near 97.19 in a fragile manner, with its broader downtrend still intact. Despite a modest short-term rebound, the greenback remains capped below multiple resistance levels from a technical perspective.

Market sentiment stays bearish, suggesting a continued preference for short positions. A decisive break below the critical support at 96.80 could trigger further downside, though a notable rebound is likely near the 96.20 zone.