Daily Price Outlook
During the European trading session, the AUD/USD currency pair struggled to maintain its upward momentum and reversed direction around the 0.6340 level, hitting an intra-day low of 0.6334 level.
However, the initial weakness in the US Dollar failed to sustain, as the dollar later recovered, contributing to the bearish move in the AUD/USD pair.
Investors are closely awaiting Australia's monthly inflation report, scheduled for release on Wednesday, which is expected to provide critical insights into the Reserve Bank of Australia's (RBA) future monetary policy.
This comes after the RBA’s recent hawkish rate cut, making the report even more significant for market participants.
On the other hand, the AUD/USD pair faces further challenges due to rising risk sentiment, particularly after US President Donald Trump’s comments on Monday regarding the imposition of sweeping tariffs on imports from Canada and Mexico.
However, losses in the AUD/USD pair could be limited as Australia’s key trading partner, China, released its 2025 annual policy statement on Sunday.
AUD/USD Under Pressure Amid Inflation Data, China’s Economic Moves, and US Tariff Risks
On the AUD front, the Australia’s monthly inflation report due on Wednesday is attracting investor attention. The report is expected to provide important insights into the future of monetary policy, especially after the Reserve Bank of Australia's (RBA) recent hawkish rate cut.
The data could give clues on whether the RBA will continue with its tightening measures or adjust its approach based on inflation trends.
Meanwhile, China, a key trading partner of Australia, is making moves in its economy. The People’s Bank of China (PBOC) injected CNY300 billion into the financial system via the one-year Medium-term Lending Facility (MLF), keeping the rate steady at 2%. In addition, they pumped CNY318.5 billion into the market through seven-day reverse repos at 1.50%.
On the other hand, the AUD/USD pair is facing some challenges due to rising risk sentiment. US President Donald Trump’s comments on Monday about moving forward with US tariffs on imports from Canada and Mexico have added to the uncertainty.
The tariffs, set to kick in next week, could affect global markets. However, the AUD is getting some support from China’s efforts to boost its economy, with policies aimed at rural reform and revitalizing the property market.
USD Weakens Amid Fed Uncertainty, Mixed Economic Data, and US-China Tensions
On the US front, the broad-based US Dollar is gaining strength, with the US Dollar Index (DXY) climbing near 106.50. At the same time, US Treasury bond yields are also rising, with the 2-year yield at 4.14% and the 10-year yield at 4.37%.
Investors are closely watching the Federal Reserve’s next move, especially after Chicago Fed President Austan Goolsbee said on Monday that the central bank needs more clarity before deciding on interest rate cuts. This cautious stance is supporting the USD, putting pressure on the AUD/USD pair.
On the data front, the US Composite PMI, which reflects overall economic activity, dropped to 50.4 in February from 52.7 in the previous month. The Services PMI declined to 49.7, falling short of expectations, while the Manufacturing PMI slightly improved to 51.6, beating forecasts.
Meanwhile, US jobless claims rose last week, with Initial Jobless Claims climbing to 219,000, higher than the expected 215,000. This suggests that the US job market is showing some weakness, which could weigh on the USD.
Furthermore, the former President Donald Trump signed a memorandum on Friday instructing US officials to limit Chinese investments in key industries. This move aims to protect national security but could escalate tensions between the US and China. Given China’s strong trade ties with Australia, any economic disruptions could impact the Australian Dollar.
AUD/USD – Technical Analysis
AUD/USD is trading at $0.63539, down 0.01%, reflecting cautious sentiment as the pair hovers near its pivot point of $0.63343.
This level is crucial as it acts as a tipping point between bullish and bearish momentum. Holding above the pivot keeps bullish hopes alive, with immediate resistance at $0.63716.
A breakout above this resistance could pave the way for gains towards $0.64057, followed by the next target at $0.64324 if bullish momentum sustains.
On the downside, immediate support lies at $0.63067, and a break below could trigger a decline towards $0.62703. If selling pressure intensifies, the next major support is at $0.62331, signaling potential for a deeper pullback.
The 50 EMA is currently at $0.63671, acting as dynamic resistance. The pair’s inability to close above this level indicates short-term bearishness amidst broader market uncertainty.
The technical outlook suggests a cautious buy above the pivot of $0.63343. An entry at this level, with a take profit at $0.63926 and a stop loss at $0.63058, offers a favorable risk-reward ratio.
However, traders should wait for confirmation in the form of volume spikes or candlestick patterns to validate the bullish bias.
Conversely, a break below $0.63343 would shift the sentiment to bearish, likely driving prices towards $0.63067 and potentially further to $0.62703.
The overall market sentiment remains mixed, influenced by global economic uncertainties and fluctuations in commodity prices.
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