The Australian Dollar (AUD) made modest gains against the U.S. Dollar (USD) on Monday, despite facing a challenging outlook due to concerns over potential U.S. tariffs on Chinese imports, a move that could impact Australia, one of China’s largest trade partners. The U.S. markets remain closed for Veterans Day, affecting trading volumes.
However, Australia’s currency remains under pressure from weak economic indicators in China. Saturday’s lower-than-expected Chinese Consumer Price Index (CPI) and Beijing’s recent stimulus measures—announced as a 10 trillion Yuan debt package to relieve local government debt—fell short of market expectations, signaling limited direct economic boosts. This dampens demand prospects for Australian exports, exerting additional downward pressure on the AUD.
Australia’s 10-year bond yield also declined to 4.6% after the Fed‘s expected 25 basis point rate cut last week. The Reserve Bank of Australia (RBA) held rates steady at 4.35%, citing persistently high underlying inflation, which it doesn’t expect to reach target levels until 2026.
Market Movers: Australian Dollar Pressured by Tariff Concerns
Minneapolis Fed President Neel Kashkari reiterated the U.S. economy’s resilience on Sunday, while Fed Chair Jerome Powell confirmed that inflation remains the bank’s central focus. Powell clarified that potential policy shifts under President-elect Trump won’t influence the Fed’s near-term strategy.
Morgan Stanley’s latest analysis anticipates a strong focus on tariffs under the Trump administration, with potential tariff hikes as high as 60% on Chinese imports. Analysts caution that this could drive inflation, possibly strengthening the USD and further straining the AUD/USD pair.
Technical Outlook: AUD/USD Faces Resistance Below 0.6600
The AUD/USD pair trades around 0.6590 on Monday, maintaining a short-term bearish outlook. Positioned below the nine-day Exponential Moving Average (EMA), the pair faces immediate resistance near 0.6604 (nine-day EMA) and 0.6616 (14-day EMA). A breakthrough above these levels could lead to a retest of 0.6687, followed by the psychological 0.6700 mark.
On the downside, support is found near the three-month low of 0.6512, recorded on November 6, with key psychological support at 0.6500 if bearish sentiment prevails.
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