The Australian Dollar (AUD) declined against the US Dollar (USD) on early Tuesday after gaining over 0.50% in the previous session. The drop followed the People’s Bank of China’s rate cut. The chart below shows that the one-year LPR was lowered from 3.10% to 3.00%, and the five-year LPR from 3.60% to 3.50%. Given Australia’s deep trade ties with China, any monetary easing in China weakens the Aussie through reduced export demand expectations.
Moreover, political instability in Australia also weighed on the AUD. The National Party withdrew from its coalition with the Liberal Party, leaving the opposition fractured. Meanwhile, the Labor Party regained power with a broader mandate, creating uncertainty in the short term. Markets typically avoid currencies tied to political volatility.
Traders are watching the upcoming Reserve Bank of Australia (RBA) decision. Despite strong April employment data showing an 89,000 increase, the market expects a 25 basis point rate cut. Expectations for easing may further undermine the Australian Dollar, especially if the central bank shifts to a dovish tone.
The 4-hour chart for AUD/USD shows that the price is consolidating within an ascending broadening wedge. This wedge has formed inside a larger symmetrical broadening wedge and highlights strong resistance at $0.6540. The current trading range for AUD/USD is between $0.6370 and $0.6540. A breakout above or below this range will define the next directional move in the pair.
