The Australian Dollar (AUD) stabilizes on Friday after recent losses, though the AUD/USD pair remains vulnerable to pressure from a strengthening U.S. Dollar (USD) amid mounting concerns over a global economic slowdown.
One of the key challenges for the AUD stems from U.S. President Donald Trump’s decision to maintain a 25% tariff on Australian aluminum and steel exports, valued at nearly $1 billion. The move places additional strain on Australia’s trade outlook, impacting key exports.
Despite the setback, Australian Prime Minister Anthony Albanese ruled out imposing reciprocal tariffs on U.S. goods, arguing that retaliatory measures would only increase costs for Australian consumers and fuel inflation.
Meanwhile, Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser warned that global trade uncertainty has reached a 50-year high. He cautioned that ongoing tariff disputes and economic tensions could further delay business investment and hinder economic growth.
Adding to market concerns, Bloomberg reports indicate that U.S.-China trade negotiations remain at a stalemate. Chinese officials claim the U.S. has yet to outline clear steps regarding fentanyl-related measures required for tariff relief. Sources close to the White House also suggest that no in-person meeting between U.S. and Chinese leaders is currently planned.
U.S. Dollar Strengthens as Market Focus Shifts to Inflation and Sentiment Data
The U.S. Dollar Index (DXY), which tracks the USD against six major currencies, strengthened following Thursday’s jobless claims report and weaker-than-expected Producer Price Index (PPI) data. At the time of writing, the DXY is trading around 104.00, with markets now eyeing the Michigan Consumer Sentiment Index data for further cues.
Labor market data reinforced the dollar’s resilience. U.S. Initial Jobless Claims for the week ending March 7 came in at 220,000, beating the forecast of 225,000. Continuing claims also fell to 1.87 million, below the expected 1.90 million, signaling sustained strength in the labor market.
Inflationary pressures in the U.S. showed signs of cooling. The PPI rose 3.2% year-over-year in February, down from 3.7% in January and below the 3.3% market expectation. Core PPI, which excludes food and energy, increased by 3.4% annually, compared to 3.8% in January. On a monthly basis, headline PPI remained unchanged, while core PPI declined by 0.1%.
Slowing inflation fueled speculation that the Federal Reserve (Fed) could consider cutting interest rates sooner than expected. U.S. monthly headline inflation eased to 0.2% in February from 0.5% in January, while core inflation dipped to 0.2%, below the forecasted 0.3%. On an annual basis, headline inflation fell to 2.8% from 3.0%, and core inflation dropped to 3.1% from 3.3%.
Meanwhile, global trade tensions intensified after President Trump threatened a 200% tariff on all European wines and champagne via social media, triggering widespread concern in financial markets.
Technical Analysis: AUD/USD Turns Bearish Below 0.6300
The Australian Dollar remains under pressure as the AUD/USD pair trades near 0.6290 on Friday, signaling a bearish shift after breaking below the ascending channel on the daily chart. Additionally, the 14-day Relative Strength Index (RSI) has dropped below 50, reinforcing the bearish outlook.
On the downside, the pair could test support near the five-week low of 0.6187, recorded on March 5. Immediate resistance lies at the nine-day Exponential Moving Average (EMA) of 0.6295, followed by the 50-day EMA at 0.6303. A break above these levels could improve short- and medium-term momentum, potentially pushing the pair toward the three-month high of 0.6408, last reached on February 21.
With trade tensions weighing on market sentiment and the USD holding firm, traders will closely monitor upcoming economic data for further direction in the AUD/USD pair.
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