The Australian Dollar (AUD) extended its gains for the second consecutive session on Tuesday, although the AUD/USD pair encountered downward pressure as the US Dollar (USD) strengthened. The rise in the USD was fueled by strong S&P Global Services PMI data and cautious remarks from the Federal Reserve, which added to the Greenback’s appeal.
Despite the USD’s strength, the AUD found support from expectations that the Reserve Bank of Australia (RBA) will maintain interest rates at their current level in April, following its first rate cut in four years in February. Additionally, the prospect of Chinese economic stimulus continues to provide optimism for Australia’s economy, which is heavily tied to trade with China.
However, the risk-sensitive AUD/USD pair could face headwinds as traders remain cautious ahead of US President Donald Trump’s tariff announcement set for April 2. While Trump indicated that some countries might receive exemptions, details of his tariff plans remain unclear, adding uncertainty to the currency markets.
The US Dollar Index (DXY), which tracks the USD against six major currencies, remained stable at around 104.30, supported by mixed S&P Global PMI data. The S&P Global US Composite PMI rose to 53.5 in March, marking the strongest growth since December 2024, driven by a rebound in the service sector. The S&P Global US Services PMI surged to 54.3, exceeding market expectations, while the Manufacturing PMI dropped to 49.8, missing estimates.
Atlanta Fed President Raphael Bostic highlighted ongoing economic uncertainty, particularly regarding inflation and trade risks. His comments led to a reduction in expectations for rate cuts in 2025, adding to the USD’s resilience. Despite concerns over a potential US economic slowdown, hawkish remarks from Fed Chair Jerome Powell last week provided support for the Greenback.
In Australia, the Manufacturing PMI climbed to 52.6 in March, and the Services PMI improved to 51.2, further supporting the AUD. Additionally, China’s plans to boost consumption through wage increases and financial relief measures were seen as beneficial for Australia’s economy due to their strong trade ties.
The AUD/USD pair is currently trading near 0.6290, with technical indicators suggesting a bearish bias as the pair remains within a descending channel. The 14-day Relative Strength Index (RSI) is just below 50, signaling continued downward momentum. Key support is at 0.6220, with a potential breakdown leading to further losses toward the March 5 low of 0.6187. On the upside, initial resistance is at 0.6308, with a breakout above this level potentially strengthening the bullish momentum.
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