The Australian dollar weakened broadly in the Asian session as renewed selling in regional stocks, disappointing Chinese data, and a hawkish Reserve Bank of Australia near-term outlook combined to dampen sentiment towards the currency. Meanwhile, higher oil prices continued to support the Canadian dollar, fueling a deeper correction in the AUD/CAD.
Risk sentiment deteriorated again Today, after the initial recovery that we witnessed after US President Donald Trump’s temporary pause on escalation with Iran. Markets appear to view the move as a tactical delay rather than a permanent solution, with the geopolitical risk premium remaining high as investors await further developments from Washington and the Middle East.
Weak Chinese data This week added additional pressure on the Australian dollar. The latest Chinese figures showed renewed weakness in domestic consumption and investment in fixed assets, reinforcing concerns about slowing demand from Australia’s largest trading partner.
At the same time, Reserve Bank of Australia minutes It helped reinforce expectations that the central bank was more likely to act Pause in June After achieving three consecutive interest rate increases this year. Policymakers acknowledged that interest rates were now likely to be restrictive and suggested the latest move would give them “space to see how the conflict in the Gulf develops.”
While the minutes did not abandon the broader tightening bias, markets interpreted this shift as confirmation that the RBA had entered a tactical wait-and-see phase. Traders who had been aggressively preparing for a fourth straight rate hike in June are now scaling back those expectations and shifting their bets toward a potential move in August instead.
Technically, the AUD/CAD extended pullback from 0.9957 indicates a short-term top forming. More importantly, a reversal has developed ahead of the key 0.9991 resistance level (2021 high), while MACD daily bearish divergence conditions also indicate fading bullish momentum. Together, the signals raise the possibility that 0.9957 may actually represent a medium-term top.
The focus is now shifting to the near term Support 0.9721. As long as this level remains stable, the broader medium-term uptrend remains in place despite the current correction. However, a strong break below 0.9721 would likely confirm a deeper pullback towards the 38.2% retracement from 0.8902 to 0.9957 at 0.9554, especially if global risk sentiment deteriorates further and oil prices continue to strengthen the CAD.
