Australian Dollar vs US Dollar holds steady as tax changes from Australian Federal Budget balance outlook

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Australian Dollar gains 0.54% to $0.7035

Highlights

Soft domestic economic data and narrowing 10-year yield spreads to 36 basis points have weakened AUD demand versus the US dollar.
Australian federal budget tax changes are shifting fiscal dynamics, prompting adjustments in investor sentiment and cross-border currency flows.
AUD/USD shows bullish momentum but overbought technicals; expected to consolidate in the $0.7000–$0.7070 range with low probability of a downside break.

Weaker Australian data and US outperformance shift sentiment and flows

The Australian Dollar’s recent performance is shaped by a series of weak domestic economic data releases in May, which signal a slower pace of growth and influence market demand for the currency. The implementation of tax changes from Australia’s Federal Budget also introduces new fiscal dynamics, prompting shifts in investor confidence and currency flows. Meanwhile, a sharper decline in the yield advantage of Australian 10-year bonds over their US counterparts, now at 36 basis points, further alters the attractiveness of AUD holdings. Additionally, a stronger-than-expected US non-farm payrolls report has improved the outlook for the US dollar, contributing to ongoing market repositioning.

Uptrend strength tempered by overbought risks and mixed momentum

Technically, AUD/USD holds above the MA-20 ($0.7001), MA-50 ($0.7011), and the long-term MA-200 ($0.6919) on the hourly chart, confirming a strong upward alignment. The Ichimoku Kijun sits at $0.7006 and serves as a nearby support, with immediate resistance emerging near $0.7070. The RSI is at 64.12 with a buy signal, while Stoch RSI and CCI indicate overbought conditions, and the ADX continues to reflect bullish momentum. In contrast, MACD and Awesome Oscillator both remain neutral, and BBP shows buyers remain in control, although caution is warranted due to multiple overbought signals.

Higher probability of breakout as consolidation steadies near resistance

In the short term, AUD/USD is expected to consolidate within a band of $0.7000 to $0.7070, reflecting typical volatility around current levels. The probability of an upward extension is higher, estimated at 65%, while the chance of a downward move is lower at 35%. In the baseline scenario, the pair trades sideways, but a bullish breakout may see prices test and exceed the upper resistance, while a bearish reversal could see a drop below immediate support at the Ichimoku Kijun level of $0.7006.

Viktoras Karapetjanc, analyst at Traders Union, sees the Australian Dollar supported by robust technical signals and recent gains above key moving averages. He believes that despite soft economic results and narrowing bond spreads, overall macro sentiment and market flows remain positive for AUD/USD. The stronger US jobs data poses a headwind, but buyers are firmly in control for now. Karapetjanc expects the pair to trade with an upward bias as long as support levels are respected. "While risks from US data persist, I see the AUD/USD as well-positioned for further gains toward $0.7070 if bullish momentum holds."

Earlier, analysts noted that AUD/USD faced short- and medium-term selling pressure, though longer-term support offered a basis for potential recovery. The latest technical and macroeconomic developments reinforce a cautiously bullish outlook, and traders should monitor whether consolidation above $0.7006 leads to a sustained breakout or heralds a reversal in the coming sessions.

Source of Data: AUD Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

The information is based on forecasts and does not constitute investment advice or a guarantee of future results. Market conditions may change. See our Disclaimer and Editorial Integrity for details.