Aud dollar struggles amid trade concerns and Fed policy uncertain
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The Australian Dollar (AUD) maintains a cautious stance against the US Dollar (USD), pressured by trade risks tied to Trump’s proposed tariffs on China and dampened by underwhelming Chinese economic stimulus. Meanwhile, shifting US interest rate expectations and a restrained Reserve Bank of Australia (RBA) position compound headwinds for the AUD.
Trade Worries and China's Tepid Stimulus Impact the AUD
The AUD has struggled to gain traction, particularly with rising concerns over Trump’s proposed tariffs on Chinese goods. As China represents a key trading partner, any disruption in demand impacts Australian exports, adding downward pressure on the AUD/USD pair. Compounding this is China's recently announced 10 trillion yuan debt package, which, while intended to support local government finances, lacked the direct economic stimulus measures investors had hoped for, tempering market sentiment.
Furthermore, China's recent Consumer Price Index (CPI) data showed only a 0.3% year-over-year increase in October, down from September’s 0.4% rise and falling short of expectations. This drop to a near five-month low indicates ongoing economic sluggishness, which in turn has bearish implications for the AUD as it weighs on demand from Australia’s largest export destination.
Monetary Policy Dynamics in the US and Australia
The Fed’s recent 25 basis point rate cut, now at 4.5%-4.75%, aligns with expectations, but Fed officials have conveyed a cautious tone on further cuts. Minneapolis Fed President Neel Kashkari emphasized the Fed’s commitment to monitoring inflation closely before considering additional rate adjustments. Conversely, the RBA recently held its rate steady at 4.35% as inflation remains above target, with an expectation to curb inflation by 2026. Despite this pause, the market anticipates continued pressure on the RBA to maintain a hawkish stance if US inflationary risks tied to Trump’s fiscal policies materialize. Should Trump’s plans for increased tariffs and fiscal spending proceed, the Fed may adopt a more restrictive policy path, strengthening the USD and adding downward momentum to the AUD/USD pair.
Technical Analysis: AUD/USD Faces Resistance at 0.6600
Currently trading around 0.6590, AUD/USD has been held below its nine-day Exponential Moving Average (EMA) of 0.6604, reflecting short-term bearish pressure. The pair’s 14-day Relative Strength Index (RSI) has also dipped below the 50 mark, reinforcing the bearish bias.
In terms of support, AUD/USD could retest its recent low at 0.6512, followed by critical psychological support at 0.6500. A breakthrough of these levels would signify potential for a further decline. Conversely, immediate resistance lies at the nine-day EMA (0.6604) and then at the 14-day EMA (0.6616). A decisive push above these levels may pave the way for AUD/USD to revisit 0.6687, followed by the 0.6700 mark.
Conclusion
The outlook for AUD/USD remains cautious, with trade-related uncertainties and evolving Fed policy posing risks. Short-term movements will likely hinge on US data releases, particularly inflation metrics, and China’s economic response to domestic challenges.
Trade Worries and China's Tepid Stimulus Impact the AUD
The AUD has struggled to gain traction, particularly with rising concerns over Trump’s proposed tariffs on Chinese goods. As China represents a key trading partner, any disruption in demand impacts Australian exports, adding downward pressure on the AUD/USD pair. Compounding this is China's recently announced 10 trillion yuan debt package, which, while intended to support local government finances, lacked the direct economic stimulus measures investors had hoped for, tempering market sentiment.
Furthermore, China's recent Consumer Price Index (CPI) data showed only a 0.3% year-over-year increase in October, down from September’s 0.4% rise and falling short of expectations. This drop to a near five-month low indicates ongoing economic sluggishness, which in turn has bearish implications for the AUD as it weighs on demand from Australia’s largest export destination.
Monetary Policy Dynamics in the US and Australia
The Fed’s recent 25 basis point rate cut, now at 4.5%-4.75%, aligns with expectations, but Fed officials have conveyed a cautious tone on further cuts. Minneapolis Fed President Neel Kashkari emphasized the Fed’s commitment to monitoring inflation closely before considering additional rate adjustments. Conversely, the RBA recently held its rate steady at 4.35% as inflation remains above target, with an expectation to curb inflation by 2026. Despite this pause, the market anticipates continued pressure on the RBA to maintain a hawkish stance if US inflationary risks tied to Trump’s fiscal policies materialize. Should Trump’s plans for increased tariffs and fiscal spending proceed, the Fed may adopt a more restrictive policy path, strengthening the USD and adding downward momentum to the AUD/USD pair.
Technical Analysis: AUD/USD Faces Resistance at 0.6600
Currently trading around 0.6590, AUD/USD has been held below its nine-day Exponential Moving Average (EMA) of 0.6604, reflecting short-term bearish pressure. The pair’s 14-day Relative Strength Index (RSI) has also dipped below the 50 mark, reinforcing the bearish bias.
In terms of support, AUD/USD could retest its recent low at 0.6512, followed by critical psychological support at 0.6500. A breakthrough of these levels would signify potential for a further decline. Conversely, immediate resistance lies at the nine-day EMA (0.6604) and then at the 14-day EMA (0.6616). A decisive push above these levels may pave the way for AUD/USD to revisit 0.6687, followed by the 0.6700 mark.
Conclusion
The outlook for AUD/USD remains cautious, with trade-related uncertainties and evolving Fed policy posing risks. Short-term movements will likely hinge on US data releases, particularly inflation metrics, and China’s economic response to domestic challenges.