AUD/USD Price Forecast: Bulls retain control near YTD peak; US-China trade talks in focus

The AUD/USD pair attracts some dip-buyers at the start of a new week and moves back closer to its highest level since November 2024 touched last Thursday. The optimism over the resumption of US-China trade talks turns out to be a key factor that benefits the China-proxy Australian Dollar (AUD). Apart from this, a broadly weaker US Dollar (USD) lends additional support to the currency pair through the first half of the European session.

Top US officials – including Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Trade Representative Jamieson Greer – will meet China's Vice Premier He Lifeng in London on Monday. US President Donald Trump and Chinese leader Xi Jinping last week agreed to further talks to settle trade disputes between the world's two largest economies. Moreover, Trump said last week that the call with the Chinese leader Xi Jinping was focused almost entirely on trade and resulted in a very positive conclusion. Investors remain hopeful about a positive development against the backdrop of a preliminary agreement struck last month in Geneva, which continues to act as a tailwind for Aussie.

The AUD bulls, meanwhile, seem rather unaffected by rather unimpressive inflation figures from China. In fact, the National Bureau of Statistics of China reported that the headline Consumer Price Index (CPI) dropped at an annual pace of 0.1% in May and producer deflation deepened to its worst level in almost two years. Adding to this China's Trade Balance data showed that imports dropped 2.1% YoY in May, pointing to weak consumption at home and fueling expectations of more government policy stimulus. Meanwhile, China's exports rose 6.3% YoY during the reported month vs. 9.3% growth recorded in April, while the trade surplus expanded from CNY689.99 billion to CNY743.56 billion in May.

Meanwhile, the closely-watched US monthly employment details released on Friday showed that the economy added 139K new jobs in May compared to the previous month's downwardly revised reading of 147K. This, however, was still higher than the market expectation for 130K. Further details revealed that the Unemployment Rate held steady at 4.2% and Average Hourly Earnings remained unchanged at 3.9%, beating consensus estimates of 3.7%. The data dampened hopes for imminent interest rate cuts by the Federal Reserve (Fed) this year, though provided only a short-lived boost to the USD. Traders are still pricing in a greater chance that the US central bank will lower borrowing costs in September.

Furthermore, Trump intensified his pressure campaign and urged Fed Chair Jerome Powell to cut rates by a full percentage point. This, along with concerns about the US government's financial health, prompts fresh USD selling and suggests that the path of least resistance for the AUD/USD pair is to the upside. In the absence of any relevant market-moving economic releases from the US on Monday, the incoming trade-related headlines should influence the USD price dynamics and help traders grab short-term trading opportunities around the currency pair. Nevertheless, the fundamental backdrop seems tilted in favor of the AUD bulls and supports prospects for further appreciation.

AUD/USD 4-hour chart

Technical Outlook

From a technical perspective, acceptance above the 0.6500 psychological mark and positive oscillators on the daily chart favor the AUD/USD bulls. A subsequent move beyond the year-to-date peak, around the 0.6535-0.6540 region, will reaffirm the positive bias and allow spot prices to climb towards the 0.6600 mark en route to the 0.6640 hurdle and the 0.6680 region, or November 2024 swing high.

On the flip side, any corrective slide below the 0.6500 mark and the 0.6475 support zone could be seen as a buying opportunity and remain cushioned near the 0.6400 mark. The next relevant support is pegged near the 0.6365-0.6360 horizontal zone, which if broken decisively might shift the near-term bias in favor of bearish traders. The AUD/USD pair might then turn vulnerable to accelerate the fall towards the 100-day Simple Moving Average (SMA), currently pegged around the 0.6340-0.6335 area. Spot prices could eventually drop to the 0.6300 round figure, en route to the 0.6245 intermediate support, before aiming to test sub-0.6200 levels.