February 27, 2025 – The Australian Dollar (AUD) remains under pressure as it continues to face downward pressure following a disappointing inflation report. This comes amid ongoing uncertainty in global trade policies, with mixed signals from US President Donald Trump on tariffs preventing any significant movement in the US Dollar.
Australian Inflation Misses Expectations
Australia’s inflation data for January revealed a 0.2% decline in consumer prices, a sharp contrast to the 0.8% increase in December. The annual inflation rate also came in at 2.5%, below the forecasted 2.6%. This weaker-than-expected inflation report has bolstered expectations that the Reserve Bank of Australia (RBA) may cut interest rates further this year.
As a result, traders are currently pricing in a minimal 20% chance of a rate cut in April, while a 100% probability is assigned to a rate cut in July. If subsequent data fails to show improvement, the likelihood of an April rate cut may increase, adding further downward pressure to the AUD.
Mixed US Tariff Signals Keep Dollar Range-Bound
Meanwhile, the US Dollar remained in a narrow range as traders digested President Trump’s conflicting signals on tariffs. Trump announced a 25% reciprocal tariff on European cars and goods, yet also delayed the implementation of tariffs on Canada and Mexico. These mixed messages have left investors uncertain about the future direction of US trade policy and kept the dollar in a holding pattern.
Technical Outlook: Bearish Momentum in AUD/USD
On the technical side, the AUD/USD is showing signs of further weakness. The pair is trading just below the key support level of 0.6300, with the 30-period Simple Moving Average (SMA) indicating a strong bearish trend. The Relative Strength Index (RSI) is approaching the oversold territory, further confirming the prevailing downward momentum.
After a failed attempt to break through the 0.6401 resistance level, the AUD/USD shifted from a bullish to a bearish trend. The failure to hold above 0.6401 led to a break below the 30-SMA and the bullish trendline, signaling a shift in market sentiment.
Currently, the 0.6300 level is acting as key support. If this level gives way, the next target for sellers could be the 0.6200 support zone. However, if the 0.6300 support holds, a bounce back towards the 30-SMA or the 0.6401 resistance is possible.
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