On Monday, after China released crucial economic data, the Australian Dollar (AUD) managed to hold its gains against the US Dollar (USD). The AUD/USD pair saw an upward movement as the USD weakened ahead of the release of Retail Sales data in the North American trading session.
China’s retail sales witnessed a 4% year – on – year growth in January – February. This was an improvement from the 3.7% increase in December. Additionally, industrial production in the same period rose by 5.9% YoY. Although it was slightly lower than the previous reading of 6.2%, it exceeded the market forecast of 5.3%. These positive economic figures from China provided support for the AUD.
Over the weekend, China unveiled a special action plan aimed at reviving consumption. This plan included measures such as increasing wages, promoting household spending, and stabilizing the stock and real estate markets. As China is a major trading partner of Australia, any positive progress regarding this stimulus plan could further strengthen the Australian Dollar.
Market Expectations and Geopolitical Tensions
Market participants widely expect that the Federal Reserve (Fed) will keep its current policy stance unchanged when its two – day meeting concludes on Wednesday. According to the CME FedWatch tool, traders have priced in nearly a 75% probability of a quarter – point rate cut by June.
Geopolitical tensions also added to the market dynamics. On Sunday, the Houthis launched an attack involving 18 ballistic and cruise missiles, along with drones, targeting the USS Harry S. Truman aircraft carrier and its escorting warships in the northern Red Sea. In response, the US defense secretary stated that the US would continue to strike Yemen’s Houthis until they stop attacking shipping. The Iran – aligned group vowed to escalate its actions in retaliation for the US strikes the previous day.
US Dollar Weakness and Australian Trade Situation
The US Dollar Index (DXY), which measures the USD against six major currencies, was trading around 103.70 at the time of writing, showing a downward trend. The Greenback faced headwinds after the University of Michigan (UoM) reported a decline in its preliminary Consumer Sentiment Index for March on Friday. The index dropped to 57.9, the lowest since November 2022, and came in below the consensus estimate of 63.1. Meanwhile, the UoM five – year Consumer Inflation Expectation rose to 3.9% in March, up from 3.5% in February.
In terms of trade, US President Donald Trump’s decision to uphold a 25% tariff on Australian aluminum and steel exports, worth nearly $1 billion, put pressure on Australia’s trade outlook. However, Australian Prime Minister Anthony Albanese confirmed that Australia would not impose reciprocal tariffs on the US, stating that such retaliatory measures would only increase costs for Australian consumers and fuel inflation.
Technical Analysis of AUD/USD
Technically, the AUD/USD pair was trading around 0.6340 on Monday. It maintained a bullish outlook after reclaiming its position within the ascending channel on the daily chart. The 14 – day Relative Strength Index (RSI) rebounded above 50, further indicating positive momentum.
The immediate support for the pair is at the nine – day Exponential Moving Average (EMA) of 0.6309, followed by the 50 – day EMA at 0.6306 and the lower boundary of the ascending channel. A decisive break below this support zone could weaken the bullish sentiment, potentially driving the pair down towards the six – week low of 0.6187 recorded on March 5.
On the upside, the pair may attempt to retest the three – month high of 0.6408, last seen on February 21. A breakout above this level would strengthen the bullish bias and could potentially push the pair towards the upper boundary of the ascending channel near 0.6470.
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Japanese Yen Struggles Against USD Amid Tariff Concerns and Hawkish BoJ Expectations
Australian Dollar Holds Steady as Trade Surplus Surges and US Dollar Faces Headwinds
