The Australian Dollar (AUD) maintained its position for the fourth consecutive day on Thursday, supported by a softening US Dollar (USD) and positive risk sentiment following changes in US President Donald Trump’s tariff strategy.
On Wednesday, the White House announced that President Trump would temporarily exempt automakers from newly imposed tariffs on goods from Mexico and Canada for a month. Furthermore, reports emerged suggesting that certain agricultural products could also be excluded from these tariffs. This development provided a boost to the AUD as the USD remained subdued.
Australia’s trade surplus surged to $5.62 billion in January, surpassing the anticipated $5.50 billion and marking an improvement from December’s revised $4.92 billion surplus. Exports rose by 1.3% month-on-month, driven primarily by non-monetary gold, while imports declined by 0.3%.
Additionally, Australian building permits saw a robust 6.3% increase in January, accelerating from December’s revised growth of 1.7%. This marked the fastest expansion in building permits since last July, signaling strong activity in the housing sector.
However, geopolitical tensions linger, with China expressing its readiness to engage in any form of conflict in response to President Trump’s escalating trade tariffs. As China remains Australia’s largest trade partner, any further deterioration in US-China relations could weigh on the AUD.
US Dollar Struggles Amid Economic Concerns
The US Dollar Index (DXY), which tracks the USD against six major currencies, hovered around 104.30 as of Thursday, facing downward pressure amid growing concerns about a slowdown in the US economy. The US ADP Employment Change for February reported only 77,000 new jobs, significantly below the forecasted 140,000, raising doubts about the strength of the US labor market.
Traders are now awaiting the US Nonfarm Payrolls (NFP) report on Friday, which is expected to show a modest rebound with job additions forecasted at 160,000, up from January’s weaker 143,000.
In addition, the Federal Reserve’s Beige Book for March will be under scrutiny, as analysts look for further signs of strain in the US economy, exacerbated by President Trump’s tariffs. Despite the tariffs taking effect earlier this week, US Commerce Secretary Howard Lutnick indicated that Trump might reconsider the policy if certain trade agreements, like the USMCA, are followed.
US economic data remains mixed: the ISM Manufacturing PMI for February was reported at 50.3, slightly below the expected 50.5 and down from January’s 50.9. In contrast, the final reading of S&P Global’s Manufacturing PMI for February showed a stronger-than-expected 52.7.
Australia’s Economy Shows Strength Despite Global Uncertainty
Despite global trade uncertainties, Australia’s economy has demonstrated resilience. The nation’s GDP grew by 0.6% in Q4 2024, exceeding market expectations. The annual GDP growth reached 1.3%, up from 0.8% in the previous quarter, signaling robust economic performance.
The Judo Bank Composite PMI for February eased slightly to 50.6 from 51.1 in January, but continued to show expansion for the fifth consecutive month. Meanwhile, the Services PMI also softened to 50.8 from 51.2, indicating sustained but moderated growth.
Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser warned that global trade uncertainty, particularly due to the US tariffs, is at a 50-year high and could potentially impact business investment and economic growth in Australia.
On the other hand, China’s economic data offers a mixed picture. The nation’s Services PMI for February unexpectedly rose to 51.4, surpassing market expectations, while China’s 2025 growth target was set at approximately 5%, accompanied by a 2% inflation target.
Technical Outlook for AUD/USD
The AUD/USD pair is trading near 0.6330 on Thursday, showing an upward trajectory within a newly formed ascending channel. The 14-day Relative Strength Index (RSI) remains above 50, reinforcing the bullish sentiment in the market.
The first key resistance level lies at 0.6380, the upper boundary of the ascending channel, followed by a three-month high of 0.6408. On the downside, immediate support is seen at the 50-day Exponential Moving Average (EMA) of 0.6310, followed by the nine-day EMA at 0.6296. A break below this support could see further declines toward the four-week low of 0.6187, recorded on March 5.
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