Australia, NZ Dollars Back Away from Resistance Levels as Economic Data Disappoints

SYDNEY, June 3, 2025 — The Australian and New Zealand dollars pulled back on Tuesday after a promising start to the week, weighed down by softer-than-expected domestic data that dimmed hopes of a sustained rally. Both currencies had flirted with key resistance levels against the U.S. dollar, but failed to break through amid renewed doubts over economic resilience in the Antipodean economies.

AUD and NZD Retreat Amid Weak Domestic Indicators

The Australian dollar (AUD) fell 0.3% to US$0.6630, after briefly touching a three-month high of US$0.6685 on Monday. Similarly, the New Zealand dollar (NZD) slipped 0.4% to US$0.6115, retreating from a weekly high of US$0.6172.

The pullback followed a slew of underwhelming economic releases, with Australian building approvals plunging 4.8% in April, well below market expectations. In New Zealand, job ads and business confidence data signaled growing pessimism, casting a shadow over the Reserve Bank of New Zealand’s (RBNZ) hawkish stance.

“It’s a case of bad timing for the bulls,” said Sean Callow, senior currency strategist at Westpac. “The Aussie and Kiwi were finally showing signs of upward momentum, but the data reminded everyone that underlying economic fragility hasn’t gone away.”

Market Context: U.S. Dollar Strength, Fed Outlook Loom

Adding pressure to the Antipodean currencies is the broader strength of the U.S. dollar, buoyed by solid American manufacturing data and rising Treasury yields. The U.S. Dollar Index (DXY) edged up to 104.20, further discouraging speculative longs in the AUD and NZD.

Investors are recalibrating expectations around U.S. Federal Reserve policy. Following a stronger-than-expected ISM Manufacturing PMI report, markets are increasingly pricing out early rate cuts from the Fed, pushing bond yields higher and making dollar-denominated assets more attractive.

“The U.S. economy continues to defy recession fears, and that’s keeping the dollar on a strong footing,” noted Kathy Lien, managing director at BK Asset Management. “Until we see a major shift in U.S. data or Fed communication, rallies in higher-beta currencies like the Aussie and Kiwi will struggle to sustain.”

Resistance Levels Prove Tough to Crack

Technical charts show the AUD/USD pair has met stiff resistance around US$0.6680–0.6700, a zone it has failed to break since early March. Similarly, NZD/USD continues to face overhead resistance at US$0.6170, a level that previously triggered heavy selling in April.

“There’s a wall of supply above these levels, and without stronger economic or commodity support, the path of least resistance is lower,” said James Kniveton, FX analyst at IG Markets. “Momentum buyers are pulling back, waiting for clearer signals.”

Commodity Prices Offer Limited Support

While iron ore and dairy prices, key exports for Australia and New Zealand respectively, have shown modest gains, they haven’t provided sufficient fuel for a sustained currency breakout. Iron ore futures in Singapore remain range-bound near US$115/tonne, while dairy prices rose only 0.8% at the latest GlobalDairyTrade auction.

Exporters remain cautious amid signs that China’s recovery is faltering. Beijing’s stimulus efforts have so far failed to significantly boost industrial demand, a key factor for Australia’s resource sector.

“China’s slow recovery is the elephant in the room,” said Su-Lin Ong, chief economist at RBC Capital Markets. “Without stronger demand from Asia’s largest economy, the tailwind for AUD and NZD is limited.”

Investor Outlook: Volatility Likely to Persist

Going forward, currency markets are expected to remain volatile, especially with multiple global and domestic data releases due later this week. Investors will be watching the upcoming RBA rate decision, due next Tuesday, and New Zealand’s Q1 GDP print, expected mid-June.

With central banks in both countries maintaining a cautious tone amid inflation uncertainty, the odds of near-term monetary tightening remain low.

“We don’t expect the RBA to hike again unless inflation surprises materially on the upside,” said Marcel Thieliant at Capital Economics. “That leaves the Aussie exposed if U.S. data continues to outperform.”

For now, investors may need to temper expectations of a breakout rally in the Antipodean currencies.