**AUD/USD Weekly Analysis: Navigating Volatility Near 0.6500 Amid Mixed Australia and US Economic Signals**
*Based on insights from Yohay Elam, Forex Crunch, and supplemental market analysis.*
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The AUD/USD currency pair moved in a choppy, sideways fashion recently, hovering around the critical 0.6500 level. This comes on the heels of diverging economic data from Australia and the United States, which has kept traders on edge and contributed to persistent uncertainty regarding future price direction. This comprehensive analysis explores the primary market drivers, significant events, and technical setups influencing the pair, as well as offering a broader context through comparisons with similar trends across global markets.
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### 1. **Australian Economic Overview: Softening Growth Meets Policy Questions**
#### a. GDP Growth and Economic Activity
Australia’s latest GDP numbers reflected an economy losing momentum:
– Quarterly GDP growth registered at 0.2 percent, underperforming expectations.
– The year-over-year growth slowed to just 1.1 percent, the weakest since the pandemic.
– Weakness was primarily attributed to:
– Diminished consumer spending due to cost of living pressures.
– Waning household confidence reflected in subdued retail activity.
– Ongoing high interest rates weighing heavily on borrowing and investment.
#### b. Labor Market Remains Tight
Despite softer economic growth, the labor market remains robust:
– Unemployment remains historically low, around 3.8 percent.
– Wage growth continues but shows some signs of peaking.
– Job vacancy rates are still above pre-pandemic averages, supporting income growth.
#### c. Inflation Trends
Recent data shows inflation is easing, though not as quickly as policymakers would prefer:
– Quarterly CPI inflation fell to 3.6 percent annualized, slightly exceeding analyst expectations.
– Non-tradables inflation, including services and housing, remains elevated, complicating the Reserve Bank of Australia’s (RBA) path forward.
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### 2. **US Economic Indicators: Resilience vs. Easing Inflationary Pressures**
#### a. Labor Market Surprisingly Robust
The US labor market surprised to the upside last week:
– Non-farm payrolls rose by 272,000 in May, far surpassing the consensus of 185,000.
– Wages showed robust 4.1 percent growth year-over-year.
– Unemployment rate ticked up slightly to 4.0 percent, hinting at some underlying softness.
#### b. Inflation and Policy Outlook
Despite strong jobs data, inflation trends suggest easing price pressures:
– Core CPI and PCE inflation continue to gradually decline, although progress remains uneven.
– The Federal Reserve has adopted a cautious tone, signaling a data-dependent approach to interest rate adjustments.
– Markets revised expectations for the first Fed rate cut to later in 2024, given ongoing labor market strength.
#### c. Divergence in Policy Expectations
– The RBA’s hawkish rhetoric contrasts with the Fed’s more neutral
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