Australian Dollar Under Pressure as Weak CPI and Jobs Data Hurt Outlook

Traders' Opinions

Summary:

AUD/USD fell to fresh weekly lows as weaker Australian inflation and labor market data reduced expectations for further RBA rate hikes, while geopolitical tensions and renewed Fed tightening bets continued supporting the US Dollar.

SELL AUDUSD

EXP

TRADING

0.71400

Entry Price

0.70000

0.72250

0.71368 -0.00295 -0.41%

0.0

Pips

Flat

0.70000

Exit Price

0.71400

Entry Price

0.72250

The Australian Dollar weakened further against the US Dollar on Wednesday, with AUD/USD sliding from the 0.7180 resistance zone to fresh weekly lows near 0.7135 during the European session as traders sharply reduced expectations for additional Reserve Bank of Australia tightening.

The decline came despite a mildly softer US Dollar environment after easing concerns over immediate energy supply disruptions linked to US-Iran negotiations weighed on Treasury yields. However, the Aussie struggled to attract buyers as investors focused on deteriorating Australian economic fundamentals.

Recent data from the Australian Bureau of Statistics showed inflation slowing from 4.6% to 4.2% year-over-year in April, while unemployment unexpectedly rose to 4.5% alongside weaker employment growth. The softer economic backdrop has significantly weakened expectations for another near-term RBA rate increase.

Markets are now pricing in only around a 10% chance of a June hike, with investors increasingly expecting the central bank to remain on hold or deliver just one final rate increase later this year. In my view, the fading yield advantage that previously supported the Australian Dollar is now becoming a major headwind for the currency.

Meanwhile, the US Dollar remains broadly supported by persistent geopolitical uncertainty and growing expectations that the Federal Reserve could maintain a restrictive policy stance for longer. Ongoing tensions surrounding Iran’s nuclear program and the Strait of Hormuz continue to keep safe-haven demand elevated, even as diplomatic talks progress.

With bearish momentum building, AUD/USD appears vulnerable to further downside pressure in the near term. A sustained move below the 0.7100 psychological level could expose a deeper correction toward monthly lows as traders continue favoring the US Dollar over risk-sensitive currencies like the Aussie.

Technical Analysis

The story this chart is telling is one of a pair that peaked, rolled over decisively, and is now completing a bearish continuation pattern that points toward a target most traders have not yet fully priced in. AUD/USD trades at 0.71438 at time of writing, and the sequence of technical developments visible across the past three weeks paints a picture that is genuinely difficult to interpret as anything other than bearish.

The rally that drove price from the early May lows all the way to the 0.7280 area between May 5 and May 7 was clean and impulsive, guided by a rising trendline that generated multiple reliable bounce points along the way. That structure is now gone. Price broke the ascending trendline in the May 13 to 15 period with a series of large bearish candles that cut through the structure without hesitation, and the 0.7220 horizontal support band, which had been a key reference throughout the rally phase, was simultaneously violated. That combination of trendline break and horizontal support failure was the first serious signal that the bullish thesis was in trouble.

What followed between May 19 and May 27 is where the chart becomes particularly interesting. Rather than recovering cleanly, price has spent the past week forming what is now clearly identifiable as a symmetrical triangle or pennant consolidation pattern. The converging upper and lower boundaries of this structure have been compressing price into an increasingly tight range, and that compression has now resolved. The breakdown from the lower boundary of the triangle, which occurred during Tuesday's session, is the confirmation signal bears were waiting for. Triangles of this type, appearing after a significant move lower, tend to resolve in the direction of the preceding trend, which in this case is firmly downward.

The 0.7160 to 0.7170 area, which had been acting as the triangle's lower boundary and was previously a support reference from the May 19 lows, is now the immediate resistance ceiling. Any attempted recovery that reaches this zone and fails to sustain above it on a closing basis should be treated as an opportunity to reload bearish positions rather than evidence that the breakdown is failing. The structure of lower highs that has defined the post-May 7 price action supports that interpretation.

On the downside, the projected path on the chart is direct and carries a measured move calculation that is internally consistent with the size of the pattern. The initial target sits at the 0.7000 round number, a psychologically significant level that also aligns with the major horizontal support band visible at the base of the chart near 0.6990 to 0.7010. This zone held price during the early May corrective phase and represents the most substantial downside reference on the current chart. A clean 2-hour close below 0.7000 would extend the move toward the 0.6940 to 0.6960 area, where the broader structural support from late April comes into play.

The 0.7220 level is the absolute ceiling for the bearish thesis. A recovery above that zone on a sustained closing basis would suggest the triangle breakdown has failed and that buyers have regained sufficient control to challenge the broader downtrend. That scenario requires a material shift in the fundamental backdrop and looks unlikely given the current chart structure.

TRADE RECOMMENDATION

SELL AUD/USD

ENTRY PRICE: 0.7140

STOP LOSS: 0.7225

TAKE PROFIT: 0.7000

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Australian Dollar Under Pressure as Weak CPI and Jobs Data Hurt Outlook

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