Australian Dollar weakened broadly in the Asian session as renewed selloff in regional equities, disappointing Chinese data, and softer near-term RBA tightening expectations combined to undermine sentiment toward the currency. At the same time, elevated oil prices continued supporting Canadian Dollar, building up the case for the case of a deeper correction in AUD/CAD.
Risk sentiment deteriorated again today after the initial recovery seen following US President Donald Trump’s temporary pause on Iran escalation. Markets appear to view the move as a tactical delay rather than a lasting resolution, with geopolitical risk premium remaining elevated as investors await further developments from Washington and the Middle East.
Weak Chinese data this week added extra pressure on Aussie. China’s latest figures showed renewed weakness in domestic consumption and fixed asset investment, reinforcing concerns about slowing demand from Australia’s largest trading partner.
Meanwhile, the RBA minutes helped solidify expectations that the central bank is likely to pause in June after delivering three consecutive rate hikes this year. Policymakers acknowledged rates are now likely restrictive and suggested the latest move would give them “space to see how the Gulf conflict developed.”
While the minutes did not abandon the broader tightening bias, markets interpreted the shift as confirmation that the RBA has entered a tactical wait-and-see phase. Traders who had aggressively positioned for a fourth straight hike in June are now scaling back those expectations and shifting bets toward a possible August move instead.
Technically, AUD/CAD’s extended pullback from 0.9957 suggests a short-term top has formed. More importantly, the reversal developed just ahead of the major 0.9991 resistance level (2021 high), while daily MACD bearish divergence conditions also point to fading upside momentum. Together, the signals raise the possibility that 0.9957 may already represent a medium-term top.
Near-term focus now turns to 0.9721 support. As long as that level holds, the broader medium-term uptrend remains intact despite the current correction. However, a firm break below 0.9721 would likely confirm a deeper pullback toward 38.2% retracement of 0.8902 to 0.9957 at 0.9554, especially if global risk sentiment deteriorates further and oil prices continue strengthening the loonie.
