The Australian dollar (AUD) regained ground on Monday, recovering its earlier losses against the U.S. dollar (USD), as investor sentiment improved. The shift was fueled by renewed optimism over a revised hostage negotiation plan between Israel and Hamas, which may lead to a temporary ceasefire.
Despite the relief rally, the AUD/USD exchange rate continues to face headwinds from broader geopolitical instability. Heightened tensions in the Middle East, particularly the conflict between Israel and Iran, continue to weigh on risk appetite.
China Data Beats Expectations but Shows Mixed Signals
Australia’s economic prospects are closely linked to China, its largest trading partner. China’s retail sales climbed by 6.4% year-on-year in May, outperforming analysts’ expectations of 5.0% and April’s 5.1%. The strong retail performance signals resilience in domestic consumption.
However, industrial production growth in China came in slightly below expectations, rising 5.8% year-on-year compared to forecasts of 5.9% and April’s 6.1%.
China’s National Bureau of Statistics noted that the economy is expected to remain “generally stable” in the first half of 2025. Still, the outlook for the second quarter remains uncertain due to potential shifts in global trade policy, which could dampen external demand.
Israel-Iran Conflict Escalates, Undermining Global Stability
Tensions in the Middle East continue to escalate despite international calls for diplomacy. According to CNN, Iran has fired multiple ballistic missiles at Israel in retaliation for Israeli airstrikes. The Iranian Revolutionary Guard claimed its missiles struck Israeli military and fuel targets.
Local authorities reported that 224 people have died in Iran and 14 in Israel. Iran’s health ministry said over 1,200 people have been injured since Israel launched attacks on Friday.
Meanwhile, diplomatic efforts have stalled. Iran has rejected mediation efforts from Qatar and Oman, stating it “will not negotiate if it is under attack.” Sources close to the negotiations also denied reports that Iran had asked Oman and Qatar to involve the United States in brokering a ceasefire or restarting nuclear talks.
Technical Outlook: AUD/USD Eyes Resistance Levels
The AUD/USD pair traded around 0.6480 on Monday. Despite global uncertainty, the pair maintains a slight bullish bias, supported by an ascending price channel on the daily chart.
The 14-day Relative Strength Index (RSI) is hovering just above 50, suggesting moderate bullish momentum. However, the pair remains below the nine-day Exponential Moving Average (EMA), indicating that short-term momentum is fragile.
Key Resistance Levels:
0.6495: Immediate resistance at the nine-day EMA.
0.6538: Seven-month high reached on June 5.
0.6687: Target if bullish momentum continues, representing an eight-month high.
0.6730: Upper boundary of the ascending channel.
Key Support Levels:
0.6470: Lower boundary of the ascending channel.
0.6425: 50-day moving average, a key level if bearish pressure intensifies.
A sustained move above 0.6495 could confirm renewed buying interest, while a break below 0.6470 would likely signal a weakening bullish trend and test investor confidence.
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