The Australian Dollar (AUD) has been on an upward trajectory against the US Dollar (USD) on Monday, buoyed by a confluence of factors. Chief among these is the positive sentiment that followed the release of China’s import – export data. China’s Trade Balance for March came in at $102.64 billion. This figure, while lower than the previous month’s $170.51 billion, still exceeded market expectations of $77 billion. In yuan terms, the trade surplus saw a remarkable jump to CNY 736.72 billion from CNY 122 billion in the prior month.
Impact of Trump’s Tariff Announcement and Commodity Prices
Adding to the AUD’s strength was US President Donald Trump’s announcement late Sunday regarding less severe tariffs on Chinese imports, including semiconductors and electronics. Trump clarified that these goods would be subject to the existing 20% tariffs related to fentanyl instead of the previously rumored 145% duties. This move alleviated some of the trade – related jitters in the market.
Moreover, stronger commodity prices provided an additional boost to the Australian Dollar. Given Australia’s status as a major exporter of commodities, higher prices translate into increased revenue and, consequently, a stronger currency. However, the ongoing trade tensions between the US and China continue to cast a long shadow over the AUD’s future prospects, especially considering Australia’s heavy reliance on Chinese demand for its exports.
US Dollar Woes and Their Ripple Effect on the AUD
The US Dollar Index (DXY), which measures the greenback’s value against a basket of six major currencies, has been on a downward slide. It extended its losses for the third consecutive session, dipping below 100.00 and approaching Friday’s three – year low of 99.01. This decline is a result of deteriorating economic data and dovish signals from the Federal Reserve, which have sapped investor confidence.
The University of Michigan’s sentiment index plummeted to 50.8 in April, while one – year inflation expectations soared to 6.7%. The US Producer Price Index (PPI) rose 2.7% year – over – year in March, down from 3.2% in February, with the core rate easing to 3.3%. The labor market data also painted a mixed picture, with jobless claims edging up to 223,000 and continuing claims declining to 1.85 million.
Minneapolis Federal Reserve President Neel Kashkari warned that the economic fallout from Trump’s trade war would hinge on how quickly trade uncertainties are resolved. He described the current situation as the biggest blow to confidence in his decade at the Fed, barring the initial COVID – 19 shock in March 2020.
On top of these domestic issues, the US – China trade tensions have re – escalated. China’s Ministry of Finance announced a significant increase in tariffs on US goods on Friday, raising duties from 84% to 125%, in response to Trump’s earlier decision to hike tariffs on Chinese imports to 145%.
China’s Economic Outlook and Policy Expectations
China’s economic data for March presented a mixed bag. Exports rose 13.5% year – over – year, a significant acceleration from 3.4% in February. However, imports declined 3.5% YoY, although this was a smaller drop compared to the 7.3% contraction previously reported.
The People’s Bank of China (PBoC) is expected to implement further monetary easing measures in Q2 2025. Analysts at Citi, as reported by Reuters, anticipate a potential 15 – basis – point cut to the loan prime rate (LPR) and a minimum 25 – basis – point reduction in the reserve requirement ratio (RRR). This is in response to mounting external pressures and aims to stimulate the domestic economy.
Technical Analysis and Future Outlook for the AUD/USD Pair
The AUD/USD pair was trading around the 0.6300 level on Monday. Technical indicators on the daily chart suggest a mildly bullish bias. The pair is trading above both the nine – day and 50 – day Exponential Moving Averages (EMAs), and the 14 – day Relative Strength Index (RSI) has climbed above the 50 threshold, further supporting the bullish sentiment.
Looking ahead, the pair could target the psychological resistance level at 0.6400, followed by the four – month high at 0.6408. Immediate support lies at the 50 – day EMA of 0.6266, with additional support at the nine – day EMA of 0.6210. A break below the 0.6210 level could weaken the short – term bullish structure, potentially exposing the pair to further downside towards the 0.5914 area, its lowest since March 2020, and the key psychological level at 0.5900.
Related Topics:
AUD/USD Trapped Below 0.6300 as Risk-Off Sentiment Overshadows China’s Strong PMI
AUD/USD Stabilizes Below 0.6300 Amid Trump Tariff Uncertainty
USD/CAD Under Pressure Amid US CPI Data and Bank of Canada Policy, AUD/CAD Stagnates Around 91c
