The Australian Dollar (AUD) halted its three-day losing streak against the US Dollar (USD) on Wednesday, driven by optimistic comments from US President Donald Trump, who indicated a willingness to negotiate with trade partners. His remarks sparked hopes for a potential easing of global trade tensions, offering temporary support for the AUD.
However, the Australian Dollar continues to face significant challenges amid ongoing market volatility, particularly after the US imposed an additional 50% tariff on Chinese imports. Given Australia’s strong economic ties to China, this move has heightened concerns. In response, Beijing condemned Trump’s tariff threat as “blackmail” and vowed to protect its interests.
Australia’s economic outlook remains fragile, with both business and consumer confidence subdued. This has led to expectations of a more dovish stance from the Reserve Bank of Australia (RBA), with markets now anticipating up to 100 basis points in rate cuts this year, starting in May, followed by further reductions in July and August.
Trade Uncertainty Weighs on AUD as US Dollar Strengthens
Despite a decline in the US Dollar Index (DXY) below the 102.50 level, the downside appears limited as the US 10-year Treasury yield rose to 4.36%. This increase reflects heightened investor demand for returns amid growing uncertainty surrounding global trade tensions. Traders are closely watching inflation data this week, which will play a crucial role in shaping expectations for future interest rate cuts.
The latest US trade policy developments added to the volatility, with US Customs and Border Protection announcing plans to begin collecting country-specific tariffs from 86 trade partners. President Trump reaffirmed his commitment to implementing broad tariffs despite outreach from countries seeking exemptions, although he expressed some openness to negotiations.
As the US Federal Reserve weighs future monetary policy decisions, market expectations are building for a 25-basis-point rate cut as early as May, although the market is betting that a cut in July is more likely. The CME FedWatch Tool now predicts total rate reductions of more than 100 basis points by the end of the year.
In Australia, consumer sentiment has significantly weakened, with the Westpac Consumer Confidence Index falling by 6% in April, after a 4% increase in March—the first decline since January. Business sentiment also dropped, with the NAB Business Confidence Index slipping to -3 in March, marking its lowest level since November.
Technical Outlook for AUD/USD
The AUD/USD pair is trading near 0.5980, still under bearish pressure, as technical indicators suggest a sustained downtrend. The pair remains below the nine-day Exponential Moving Average (EMA), with the 14-day Relative Strength Index (RSI) below 30, indicating the possibility of a short-term corrective rebound. Immediate support is seen near 0.5914, the lowest level since March 2020.
On the upside, the initial resistance lies at the nine-day EMA around 0.6113, followed by the 50-day EMA at 0.6259. A stronger recovery could test the four-month high at 0.6408 if bullish momentum gains traction.
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