The Australian Dollar (AUD) extended its advance against the US Dollar (USD) on Monday, buoyed by a combination of improved global risk sentiment, firmer commodity prices, and fresh signs of easing trade tensions. The AUD/USD pair gained momentum after US President Donald Trump announced a softer tariff stance on key Chinese imports late Sunday, easing fears of an escalating trade war.
Trump clarified that semiconductor and electronics imports from China would remain subject to existing 20% tariffs under fentanyl-related measures, rather than the previously floated 145% rate. This shift reduced market anxiety and supported risk-sensitive currencies like the Australian Dollar.
China’s Trade Resilience and Commodities Boost the Aussie
Stronger-than-expected trade data from China further underpinned the AUD, given Australia’s deep economic ties with the Chinese market. China’s March trade surplus surged to CNY 736.72 billion, up sharply from the previous month’s CNY 122 billion. In US Dollar terms, the surplus reached $102.6 billion, exceeding forecasts despite falling short of February’s $170.51 billion.
China’s General Administration of Customs acknowledged the “complex and severe” external landscape but struck a confident tone, pledging to take necessary actions to defend national sovereignty and maintain export momentum. The agency highlighted promising early-year trade figures in both volume and quality, reinforcing global investor optimism.
US Dollar Pressured by Weak Economic Signals and Fed Uncertainty
The US Dollar Index (DXY) continued its decline, slipping below the critical 100.00 mark to approach Friday’s three-year low of 99.01. The drop reflects mounting investor concerns amid sluggish economic data and dovish signals from Federal Reserve officials.
April’s University of Michigan consumer sentiment index fell to 50.8, while one-year inflation expectations jumped to 6.7%, reflecting uncertainty. Meanwhile, the US Producer Price Index (PPI) for March eased to 2.7% year-over-year from 3.2% in February, and core PPI cooled to 3.3%. Weekly jobless claims edged up to 223,000, though continuing claims dipped to 1.85 million, indicating a mixed labor market picture.
Minneapolis Fed President Neel Kashkari warned that the ongoing trade conflict poses one of the biggest threats to economic confidence in a decade, second only to the COVID-19 shock in 2020. His comments further weighed on the USD amid heightened concerns over a potential economic slowdown.
Inflation data offered little relief. The Consumer Price Index (CPI) fell to 2.4% year-over-year in March, down from 2.8% in February and below expectations. Core CPI also slowed to 2.8%, missing forecasts and signaling moderating price pressures. Federal Reserve minutes revealed growing internal concern over “difficult tradeoffs” between inflation control and growth support.
China’s Growth Signals and Stimulus Hopes Aid Sentiment
March trade figures showed China’s exports growing 13.5% year-over-year, up from 3.4% in February, while imports declined by a milder 3.5%, an improvement from the prior 7.3% drop. Analysts expect the People’s Bank of China (PBoC) to introduce further monetary easing in Q2 2025, with potential cuts to the loan prime rate and reserve requirement ratio.
Meanwhile, the Wall Street Journal reported that China has opened trade talks with the European Union, aiming to boost cooperation. Australia is also preparing to resume trade negotiations with the EU, further enhancing sentiment around the AUD.
Technical Outlook: AUD/USD Holds Near 0.6300 with Bullish Momentum
The AUD/USD pair hovered near the 0.6300 mark on Monday, supported by technical indicators pointing to continued upward momentum. The pair trades above both the nine-day and 50-day Exponential Moving Averages (EMAs), while the 14-day Relative Strength Index (RSI) has climbed past the neutral 50 level, signaling mild bullish bias.
On the upside, the pair faces psychological resistance at 0.6400, with a potential breakout targeting the four-month high of 0.6408.
Initial support lies at the 50-day EMA at 0.6266, followed by the nine-day EMA at 0.6210. A decisive move below these levels could undermine the current bullish structure, exposing the AUD/USD to further downside toward the March 2020 low of 0.5914 and the key 0.5900 threshold.
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