Australian Dollar hits fresh high since June 5 as bearish USD outweigh weak China data

The Australian Dollar (AUD) strengthened to a fresh high since June 5 as US Dollar (USD) selling intensified while China's weak economic data weighed on the market. China's Retail Sales rose 0.6% year-over-year in July, below expectations and the previous month's 1.0% growth. Industrial Production also fell short, expanding 4.5% year-over-year compared to 5.3% in June.

Fixed Asset Investment declined significantly in July, with a 6.7% year-to-date decrease, outpacing the 6.2% anticipated fall and 5.7% previously. The US Dollar Index (DXY) dropped to a two-month low due to reduced expectations of an immediate interest rate hike by the US Federal Reserve (Fed), which is buoying the AUD/USD pair.

Inflation concerns are also lessening, as US Retail Sales fell 0.6% in July, marking the largest month-on-month decline since May 2025. The Australian Dollar gains support from the Reserve Bank of Australia's (RBA) hawkish stance, signaling a potential upside for the AUD/USD pair and extending its recent uptrend from the June swing low near 0.6845.

The pair is now trading above the 100-day Simple Moving Average (SMA) and close to the 61.8% Fibonacci retracement at 0.7124. A continued bullish trend could drive the AUD/USD pair to the 78.6% Fibonacci level near 0.7193 and then the cycle high region at 0.7281. On the downside, support can be found at the 50% retracement at 0.7075 and the 100-day SMA at 0.7061.

A deeper decline would expose the 38.2% retracement at 0.7026, followed by the 23.6% level at 0.6966, before testing the 200-day SMA at 0.6940 and the swing low area near 0.6869.