Daily Price Outlook
During the European trading session, the AUD/USD currency pair failed to continue its upward trend and turned bearish around the 0.6213 level, hitting an intra-day low of 0.6170.
However, the decline was mainly due to rising US-China trade war tensions after China retaliated against new US tariffs. China announced a 15% tariff on US coal and liquefied natural gas (LNG) imports, along with a 10% tariff on crude oil, farm equipment, and some automobiles.
Moreover, China is imposing export controls on key minerals like tungsten and molybdenum to safeguard national security. As Australia relies heavily on trade with China, these tensions increased market uncertainty, putting pressure on the Australian dollar.
Furthermore, concerns over the Reserve Bank of Australia (RBA) possibly cutting interest rates in February added to the AUD/USD pair’s weakness. The RBA has kept its Official Cash Rate (OCR) at 4.35% since November 2023, waiting for inflation to return to its 2%-3% target before easing policy.
Market expectations remain cautious, but Westpac still predicts a total of 100 basis points in rate cuts during 2025. If the RBA signals an earlier rate cut, the AUD could face further downside pressure.
AUD/USD Under Pressure from US-China Trade Tensions and RBA Rate Cut Expectations
On the AUD front, the losses in the AUD/USD pair came after market volatility increased due to concerns over the ongoing trade tensions between the US and China, Australia’s major trading partner.
President Trump hinted at speaking with China soon, but warned that if a deal wasn’t reached, tariffs could become much higher. This uncertainty around trade is adding pressure to the Australian dollar, as investors watch how these tensions will unfold.
In addition, Trump recently announced a delay in steep tariffs on Mexico and Canada after the countries agreed to deploy 10,000 soldiers to help combat drug trafficking at the US border. This decision comes right after Trump imposed heavy tariffs on goods from Mexico, Canada, and China, causing further concerns over global trade.
Meanwhile, Chinese manufacturers are shifting production to other countries to avoid these tariffs, which could affect Australia’s trade relationship with China and weaken the AUD even more.
Moreover, the Australian dollar is also under pressure from expectations that the Reserve Bank of Australia (RBA) might cut interest rates in February. The RBA has kept rates steady at 4.35% since November 2023, waiting for inflation to fall within the target range.
With economic signs such as a decline in retail sales and a lower-than-expected PMI in China, the likelihood of a rate cut has grown. Analysts now expect a 25 basis point cut in February, which could add further weakness to the Australian dollar.
US Dollar Strengthens Amid Trade Tensions, Inflation Data, and Fed Caution
On the US front, the broad-based US dollar has been stabilizing around 108.70 after losing some gains from the previous session. A key development was the announcement that President Trump signed an executive order to create a government-owned investment fund.
This fund could potentially help the US profit from TikTok if an American buyer is found. Trump has pushed for the US to acquire a 50% stake in the company, and TikTok has until early April to secure a deal.
In addition, Federal Reserve Bank of Chicago President Austan Goolsbee suggested that the Fed would need to be cautious with any rate cuts due to uncertainties, including inflation risks.
Meanwhile, data from the Institute for Supply Management (ISM) showed that the US Manufacturing PMI rose to 50.9 in January, indicating better-than-expected economic activity.
The US Personal Consumption Expenditures (PCE) Price Index also showed inflation pressures, with an annual rise of 2.6%, keeping the Fed cautious about adjusting monetary policy.
On the trade front, President Trump has threatened 100% tariffs on BRICS nations if they try to introduce a currency alternative to challenge the US dollar.
These developments, along with the Fed's cautious stance, have contributed to the strengthening of the US dollar, impacting the AUD/USD pair.
The Australian dollar is facing pressure as global trade tensions and US monetary policy uncertainties continue to shape market sentiment.
AUD/USD – Technical Analysis
The AUD/USD pair is trading at $0.61872, down 0.62%, reflecting persistent bearish sentiment as the pair struggles below the key pivot point at $0.62087.
The price action remains under pressure, with the pair facing immediate resistance at $0.62568. A breakout above this level could trigger a corrective rally toward $0.62922, with further gains potentially capped at $0.63235.
On the downside, immediate support is observed at $0.61674. A decisive break below this level may accelerate selling pressure, exposing the next support levels at $0.61324 and $0.60890.
The 50-day Exponential Moving Average (EMA) at $0.62432 reinforces the bearish outlook, acting as a dynamic resistance level. The sustained price action below this moving average indicates that sellers maintain control.
Technical indicators further confirm the downward bias. The Relative Strength Index (RSI) hovers in bearish territory, suggesting the pair is not yet oversold, leaving room for additional downside.
The Moving Average Convergence Divergence (MACD) indicator also signals bearish momentum with a widening gap between the MACD line and the signal line.
Related News
- GOLD Price Analysis – Feb 04, 2025
JOIN LHFX TODAY
24/7 live support, lightning fast withdrawals, guaranteed safe and reliable trading platforms with a true ECN broker.