The Australian Dollar (AUD) is struggling against the US Dollar (USD) on Thursday, although concerns in the market have eased following news that US President Donald Trump’s proposed tariffs on China are significantly smaller than initially anticipated. This development has helped calm investor sentiment, particularly given Australia’s strong trade links with China, which make the Australian economy sensitive to changes in China’s economic environment.
President Trump announced plans to impose a 10% tariff on Chinese imports starting February 1, citing concerns over fentanyl shipments from China to Mexico and Canada, according to Reuters. In response, Chinese Vice Premier Ding Xuexiang warned of the potential consequences of a trade war, stating that “there are no winners” in such conflicts. His comments come as China braces for possible tariffs under Trump’s administration, as reported by CNBC.
In an attempt to stabilize its stock markets, Chinese authorities introduced several measures on Thursday, including allowing pension funds to increase investments in domestic equities. A pilot program enabling insurers to purchase stocks will be launched in the first half of 2025, with an initial investment of at least 100 billion Yuan. Additionally, the People’s Bank of China (PBoC) stated that it would “expand the scope and increase the scale of liquidity tools to fund share purchases at the proper time.”
The S&P/ASX 200 Index fell below the 8,400 mark on Thursday, primarily driven by a decline in mining stocks as weaker commodity prices exerted pressure on the sector. Despite strong gains in US equity markets, investors remain cautious, assessing the potential fallout from President Trump’s policy changes.
The AUD/USD pair is trading near 0.6270 on Thursday, with technical analysis suggesting movement within an ascending channel pattern, indicating a possible bullish bias. The 14-day Relative Strength Index (RSI) is slightly above 50, further supporting a positive market outlook.
On the upside, the AUD/USD pair could test the psychological resistance level at 0.6300, with the next target around the upper boundary of the ascending channel at 0.6320.
On the downside, initial support is seen at the nine-day Exponential Moving Average (EMA) at 0.6244, followed by the 14-day EMA at 0.6238. Stronger support is located at the ascending channel’s lower boundary around 0.6220, with further support at the psychological level of 0.6200.
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