Daily Price Outlook
During the European trading session, the AUD/USD currency pair continued its downward movement, staying around the 0.6259 level and hitting an intra-day low of 0.6255. The main reason for this decline can be traced to a few key factors.
First, the Australian Dollar (AUD) came under pressure due to weaker-than-expected Trade Balance data released earlier in the week. This news highlighted that Australia's exports were lower than anticipated, which caused the AUD to lose some strength against the US Dollar (USD).
Second, the ongoing tensions between the US and China over trade issues also contributed to a "risk-off" sentiment in the market. Traders are worried about the potential impact of these trade disputes, which is making them more cautious and pushing the AUD lower.
Lastly, although the US Dollar Index (DXY) was relatively steady at around 107.50, the weaker-than-expected US Services PMI data might have put some downward pressure on the USD.
Despite this, the overall market sentiment remains cautious, which continues to favor the US Dollar, contributing to the Australian Dollar’s struggles.
AUD/USD Under Pressure Amid Weaker Trade Data and US-China Tensions
On the AUD front, the Australian Dollar (AUD) dropped against the US Dollar (USD) after weaker-than-expected Trade Balance data was released on Thursday. Australia's trade surplus for December fell to 5,085 million AUD, missing the expected 7,000 million AUD and lower than the previous month's surplus of 6,792 million AUD.
Although exports increased by 1.1%, they slowed from November’s 4.2% rise. Meanwhile, imports surged by 5.9%, up from 1.4% in the previous month. This weaker trade data contributed to the AUD's decline.
Moreover, the ongoing US-China trade tensions added to the downward pressure on the AUD/USD pair. China responded to new US tariffs with its own set of tariffs, including a 15% levy on US coal and LNG imports and a 10% tariff on US crude oil, farm equipment, and certain automobiles.
These escalating trade disputes are causing uncertainty, especially for Australia, as China is a key trading partner. Traders are closely monitoring the situation, fearing that further tensions could hurt global trade and economic growth.
Despite the trade concerns, Australia’s private sector showed some growth in January, with the Judo Bank Composite PMI rising to 51.1 from 50.2, indicating modest expansion. The Services PMI also climbed to 51.2, marking its twelfth consecutive month of growth. While the overall growth was moderate, it provided some positive news for the Australian economy. However, the combination of trade data and global risks kept the AUD under pressure.
AUD/USD – Technical Analysis
The AUD/USD pair is trading at $0.62631, down 0.33%, reflecting sustained bearish sentiment amid broader market weakness. The pair remains under pressure below the pivot point at $0.62917, signaling a potential continuation of the downtrend unless buyers regain control.
Immediate resistance stands at $0.63262, followed by $0.63556 and $0.63858, which align with previous price rejections. A breakout above these levels could trigger renewed bullish momentum, potentially shifting sentiment. However, given the current price action, upward movement appears constrained.
On the downside, immediate support is seen at $0.62417, with additional safety nets at $0.62061 and $0.61697. A decisive break below $0.62417 could intensify selling pressure, exposing the pair to further declines.
The 50-day Exponential Moving Average (EMA) at $0.62218 is in close proximity to support, making it a critical level for short-term traders. A bounce from this area may indicate temporary stabilization, but sustained trading below the pivot point at $0.62917 favors the bearish outlook.
From a strategic standpoint, a sell position below $0.62915 is preferred, with a take profit target at $0.62417 and a stop loss at $0.63255 to mitigate risk. Traders should monitor price action near the 50 EMA and support levels to assess potential reversal signs.
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