Australian Dollar Recovers Losses as Safe-Haven Flows Cool, US PMIs Fail to Inspire Dollar Bulls

Economic

Summary:

The Australian Dollar rebounded from a one-month low against the US Dollar on Monday as fading geopolitical risk appetite and mixed US PMI data curbed Greenback demand.

BUY AUDUSD

Close Time

CLOSED

0.64350

Entry Price

0.64800

0.63900

0.66458 -0.00062 -0.09%

45.0

Pips

Profit

0.63900

0.64800

Exit Price

0.64350

Entry Price

0.64800

The Australian Dollar (AUD) staged an impressive intraday turnaround against the US Dollar (USD) on Monday, clawing back early-session losses that had pushed the currency pair to its lowest level in nearly a month. While the day began under a cloud of geopolitical tension and risk-off flows — triggered by a weekend U.S. military strike on Iran — market sentiment shifted in New York trading hours as the latest batch of U.S. economic data failed to reinforce bullish conviction in the Dollar.

At the time of writing, AUD/USD is trading near 0.6426, having bounced strongly from the session’s low at 0.6372. The pair was last seen down just 0.38% on the day, after recovering most of the ground lost during the Asian and European sessions. The comeback reflects a broader reassessment of the safe-haven trade and growing investor unease over the sustainability of the Greenback’s recent strength.

The initial bout of Aussie selling was fueled by escalating geopolitical tensions after the United States launched strikes against Iranian targets over the weekend, stoking fears of broader Middle East instability. The USD initially benefited from safe-haven inflows, with global risk sentiment subdued and commodity-linked currencies like the AUD on the back foot.

However, as the session progressed and no immediate retaliatory response from Iran emerged, markets began to unwind some of the safety-driven trades. Traders rotated back into risk-sensitive assets, including the Australian Dollar, as attention shifted from headlines to data.

A key catalyst for the Aussie’s rebound came from the release of mixed US Purchasing Managers’ Index (PMI) data from S&P Global. The Composite PMI dipped slightly to 52.8 in June from 53.0 in May — still signaling expansion, but indicating a marginal loss in momentum.

The Manufacturing PMI came in at 52.0, unchanged from the prior month’s 15-month high and above expectations, suggesting some resilience in the industrial sector. However, the Services PMI — the largest component of the U.S. economy — slipped to 53.1 from 53.7, reflecting softer demand and tempering enthusiasm for the USD.

The data did little to support a stronger case for the Federal Reserve to maintain a hawkish stance, particularly as inflation continues to trend downward and rate expectations for 2024 remain anchored to at least one rate cut before year-end. As a result, the US Dollar’s initial strength faded, giving the Aussie room to retrace losses.

Earlier in the Asia session, Australia’s own PMI data provided a degree of insulation against geopolitical volatility. According to S&P Global, the Australian private sector recorded its second-fastest expansion in ten months. The services sector, in particular, notched a three-month high in activity, while manufacturing held broadly steady — a welcome development for a market that has grown increasingly cautious on the domestic outlook amid soft employment and retail sales data in recent weeks.

The upbeat figures temporarily eased concerns about the Reserve Bank of Australia (RBA) needing to pivot toward policy easing. While some economists still forecast a potential rate cut in late 2024, the stronger PMI print may delay that narrative and keep AUD sentiment anchored in the near term.

Technical Analysis

From a technical perspective, AUD/USD is now testing a key pivot point at 0.6427, which could determine the pair’s direction over the next few sessions.

The Super Trend indicator has generated a clear long signal, and the Pivot Point HL is pointing to a bullish underlying structure in the market. The pair has also managed to hold above recent lows and climb back within a broader consolidation zone, adding to the near-term upside potential.

If momentum continues to build, the next upside target sits near 0.6480 — a level that would mark a full retracement of Monday’s geopolitical-driven drop and challenge short-term resistance.

TRADE RECOMMENDATION

BUY AUDUSD

ENTRY PRICE: 0.6435

STOP LOSS: 0.6390

TAKE PROFIT: 0.6480

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Warren Takunda

Economic

Summary:

USD/CAD extended its rally on Monday, trading near 1.3780, as geopolitical tensions in the Middle East and disappointing Canadian retail data fueled safe-haven demand for the U.S. Dollar

BUY USDCAD

Close Time

CLOSED

1.37500

Entry Price

1.40000

1.36700

1.37718 +0.00018 +0.01%

80.0

Pips

Loss

1.36700

1.36690

Exit Price

1.37500

Entry Price

1.40000

The U.S. Dollar continued to gain ground against the Canadian Dollar on Monday, with the USD/CAD pair trading firmly around 1.3780 in North American hours, after briefly touching a session high of 1.3803. The move extends a strong five-day rally for the pair, underpinned by a renewed wave of geopolitical anxiety and mounting concerns over the Canadian economy’s growth prospects.

Risk sentiment remains on edge after the United States launched airstrikes over the weekend on three Iranian nuclear facilities, an escalation that revived fears of a broader conflict in the Middle East. In a televised statement, former President Donald Trump described the operation as a “very successful attack” and issued a stern warning of additional military responses should Iran retaliate. The strikes raised alarm bells among investors already wary of geopolitical instability and the potential implications for global energy markets.

The airstrikes have intensified concerns around the Strait of Hormuz, one of the world's most strategically vital oil shipping lanes. Although oil prices rose in response, broader risk-off sentiment dominated trading floors, funneling capital into traditional safe-haven assets like the U.S. Dollar and pushing USD/CAD higher.

The U.S. Dollar’s strength has been bolstered by its status as a safe-haven currency during periods of global uncertainty. As markets digest the implications of increased military tension in the Middle East, the greenback has found consistent support — not only against commodity-linked currencies like the Canadian Dollar but also against a broader basket of major peers.

While higher oil prices would typically offer some support to the loonie, that historical correlation has weakened in recent months. This is largely due to a shifting domestic macroeconomic backdrop and an increasingly dovish stance from the Bank of Canada (BoC). As a result, the loonie is struggling to find traction, even amid favorable commodity moves.

Adding further downward pressure on the Canadian Dollar were Friday’s disappointing retail sales figures. According to preliminary estimates from Statistics Canada, retail sales volumes contracted by 1.1% in May — a stark reversal from April’s 0.3% growth and well below market forecasts. The data points to a deterioration in consumer spending, a key driver of domestic economic activity, and reinforces the narrative of a softening Canadian economy.

The weak consumption data comes on the heels of other tepid indicators, including a sluggish labor market and subdued business investment. With inflation cooling and growth indicators softening, markets are increasingly pricing in the likelihood of additional interest rate cuts from the Bank of Canada. The central bank already initiated a dovish pivot earlier this year, delivering a 25-basis-point cut, and the latest data may pave the way for further easing in the second half of 2025.

This diverging monetary policy outlook between the Federal Reserve — which remains cautious about inflation and has kept rates on hold — and the BoC is adding another layer of upward momentum to USD/CAD.

Technical Analysis

From a technical perspective, USD/CAD remains well supported within a short-term bullish correction wave. The pair has consistently traded above its 50-period exponential moving average (EMA50), indicating sustained upward momentum. After breaching the key resistance zone at 1.3760, the price is attempting to establish new ground in the 1.38 handle.

The Relative Strength Index (RSI) is showing positive signals, further strengthening the bullish case — though it is now nearing overbought territory. While this suggests a potential pullback or consolidation phase in the near term, the broader trend remains upward unless key support levels, such as 1.3700, are breached.

A successful hold above 1.3760 would open the door for a potential run toward 1.4000, especially if geopolitical tensions persist and Canadian macro data continues to underwhelm.

TRADE RECOMMENDATION

BUY USDCAD

ENTRY PRICE: 1.3750

STOP LOSS: 1.3670

TAKE PROFIT: 1.4000

Risk Warnings and Disclaimers

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Eva Chen

Economic

Forex

Summary:

PMI data hint at undercurrents in the UK's future prospects. The possibility of the Bank of England's rate cut in August is opening up.

SELL GBPUSD

Close Time

CLOSED

1.34205

Entry Price

1.32780

1.35900

1.33667 -0.00040 -0.03%

169.5

Pips

Loss

1.32780

1.35902

Exit Price

1.34205

Entry Price

1.35900

Fundamentals

A survey released on Monday showed that UK business activity expanded modestly in June, with new orders growing for the first time this year. However, the pace of job cuts by employers accelerated, and there was concern over the Middle East conflict.

The S&P Global UK Composite PMI, which measures the private sector economy, rose from 50.3 in May to 50.7, slightly above the 50.0 threshold for expansion. The dominant service sector in the UK economy achieved its fastest growth in three months. Factory activity declined for the ninth consecutive month, but this was the smallest contraction since January.

S&P stated that the report is in line with an economic growth rate of approximately 0.1% during the period from April to June, which also matches the Bank of England's estimate of the current basic pace of economic expansion. Additionally, S&P indicated that the employment, new export business, and future output indices of the Composite PMI in June deteriorated, with the latter being affected by "increasing global economic and political uncertainty."

Market Observations: The UK economy remains sluggish at the end of the second quarter. Although the business environment has been improving continuously since the recession in April, alleviating concerns over a recession, the growth of business activity remains disappointingly stagnant, indicating a quarterly GDP growth rate of only 0.1% in the second quarter. Compared to last year, business confidence remains low and declined again in June.

Apart from concerns over the impact of recent government policies and global trade protectionism, the data collection in June coincided with the escalation of tensions in the Middle East. With companies grappling with higher labor costs resulting from the budget last autumn, lower demand, and subdued confidence, job losses continued.

However, these circumstances have led to a significant cooling of inflationary pressures, especially in the service sector, which has been a major concern for the Bank of England. Thus, the near-stagnant growth, declining employment, and lower inflation have opened the door for the Bank of England to cut rates again at its next policy meeting in August.

Lackluster Economic Recovery, Rising August Rate Cut Expectations, and Short-term Downside Pressure on the Market_1

Technical Analysis

The intraday trend of GBPUSD currently remains neutrally downward. As long as the resistance level at 1.3592 holds, the risks will remain mildly to the downside. A break below 1.3370 will extend the corrective decline, reaching the 38.2% retracement of the 1.2076 to 1.3631 range, ultimately falling to 1.3278.

Trading Recommendations

Trading Direction: Sell

Entry Price: 1.3440

Target Price: 1.3278

Stop Loss: 1.3590

Valid Until: July 8, 2025, 23:55:00

Support: 1.3370/1.3334/1.3305

Resistance: 1.3448/1.3511/1.3579

Risk Warnings and Disclaimers

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Eva Chen

Commodity

Political

Summary:

Safe-haven assets retreat, unresponsive to geopolitical tensions.

SELL XAUUSD

Close Time

CLOSED

3380.39

Entry Price

3231.00

3425.00

4303.32 +3.93 +0.09%

560.0

Pips

Profit

3231.00

3324.39

Exit Price

3380.39

Entry Price

3425.00