AUD/USD Falls Amid Rising US Treasury Yields and Inflation Concerns

Key Takeaways

• AUD/USD traded at 0.70986, down 0.00073, or 0.10%, after hitting a session low of 0.70864.
• Australian 10-year yields lag US Treasuries, narrowing the yield gap to 40bps from 75bps a month ago.
• RBA warns fuel-driven inflation may embed expectations, keeping monetary policy tighter.
• Australia’s consumer sentiment rebounded to 83 from April’s 80.1, but remains below 100.
• Upcoming Australian jobs data and US Fed rate bets could dictate AUD/USD direction.

The Australian dollar remained near five-week lows at 0.70986 after dropping to 0.7080 overnight. Global risk aversion, elevated US Treasury yields, and a reduced Australia-US 10-year yield gap have pressured AUD/USD. Traders are adjusting to a stronger US rate outlook while the RBA is expected to hold rates steady at 4.35% in June.

RBA Flags Inflation Risk

RBA Assistant Governor Sarah Hunter highlighted that higher fuel costs could lift inflation expectations and embed price pressure in Australia. Headline inflation may peak at 4.8% in Q2, while underlying inflation is expected to rise by 0.4 percentage points in March 2027. Persistent energy-driven inflation reinforces caution, keeping AUD/USD under pressure despite yield support on dips.

Jobs Data Becomes Key Domestic Test

Australia’s upcoming jobs report, forecast at 15,000 new positions with unemployment steady at 4.3%, will test domestic economic resilience. Softer data could add downside pressure to AUD/USD, while stronger employment may help stabilise the currency without alleviating inflation concerns.

Technical Analysis

AUD/USD is trading near 0.7099 after failing to sustain momentum above 0.7277 earlier this month. The pair has slipped below the 5-day, 10-day, and 20-day moving averages, indicating a short-term bearish bias. Price action suggests sellers are in control, with immediate support at 0.7090–0.7000 and major support near 0.6945. Resistance is located at 0.7145–0.7180 and 0.7277. The decline appears controlled rather than panicked, signalling a corrective phase rather than abrupt volatility.

Discover full expert analysis on AUD/USD, yield spreads, and inflation risks in this article.