Daily Price Outlook
During the European trading session, the AUD/USD currency pair struggled to recover and stayed under pressure around the 0.6270 level, even dropping to an intra-day low of 0.6264.
However, the reason for this downward trend can be linked to growing fears of a global trade war. The US is expected to announce new tariffs, which could hurt global trade and weaken riskier currencies like the Australian Dollar (AUD).
Despite this pressure, the AUD later found some support after Australia’s Consumer Inflation Expectations rose to 4.6% in February, up from 4.0% previously.
However, the gains in the AUD remain limited as traders await key US economic data. The US Producer Price Index (PPI) inflation report, due later in the day, could influence the US Dollar’s (USD) movement.
If the data shows higher-than-expected inflation, it could strengthen the USD by increasing the chances of the Federal Reserve keeping interest rates higher. This would add further pressure on the AUD/USD pair.
US Dollar Weakness and Trade Tensions Impact AUD/USD
On the US front, the broad-based US dollar has been losing traction and remains under pressure as the US Dollar Index (DXY) trades around 108.00.
This weakness comes after US inflation data showed the Consumer Price Index (CPI) rising 3.0% year-over-year in January, slightly higher than the expected 2.9%. Core inflation, which excludes food and energy prices, also increased to 3.3% from 3.2%.
These higher inflation figures have lowered expectations for an early interest rate cut by the Federal Reserve (Fed).
However, the CME FedWatch Tool now suggests only a 30% chance of a rate cut in June. Fed Chair Jerome Powell reinforced this view, stating that strong job growth and rising prices mean there’s no rush to lower rates.
Meanwhile, a Reuters poll shows that most economists now expect the Fed to delay cutting rates until later this year.
For the AUD/USD pair, the weakening US Dollar provides some support, but gains remain limited due to ongoing trade concerns. US President Donald Trump has expanded steel and aluminum tariffs by 25%, affecting key allies like Australia.
This move has raised fears of further trade tensions, which could negatively impact riskier currencies like the Australian Dollar (AUD).
Meanwhile, the Fed is expected to keep interest rates steady, with officials like Cleveland Fed President Beth Hammack emphasizing a patient approach. Investors now await more US economic data, as any surprises could influence the AUD/USD pair’s direction in the coming days.
AUD/USD Faces Pressure Amid Trade Tensions and RBA Rate Cut Expectations
On the AUD front, the Australian Dollar (AUD) managed to gain some ground against the US Dollar (USD) after Australia’s Consumer Inflation Expectations rose to 4.6% in February from 4.0% previously.
This increase suggests that inflation pressures remain, which could influence the Reserve Bank of Australia’s (RBA) monetary policy. However, the AUD’s gains were limited due to growing concerns over a potential global trade war.
US President Donald Trump announced a 25% tariff hike on imports, sparking fears of economic strain. Traders are also closely watching the US Producer Price Index (PPI) inflation report, which could impact the Federal Reserve’s (Fed) next move on interest rates.
Meanwhile, trade tensions between the US and Australia have added more pressure on the AUD/USD pair.
Trump’s trade adviser, Peter Navarro, accused Australia of damaging the aluminum market, increasing uncertainty about whether Australia will receive exemptions from the new tariffs.
Moreover, expectations for an RBA interest rate cut are rising, with a 95% chance of rates being lowered from 4.35% to 4.10% in the coming months. If the RBA moves forward with a rate cut, the AUD could face further downside against the USD.
AUD/USD – Technical Analysis
The AUD/USD pair is trading at $0.62926, hovering above its pivot point of $0.62860. The pair is attempting to sustain its modest upside momentum, supported by the 50-day EMA at $0.62845, which reinforces near-term bullish sentiment.
On the upside, immediate resistance stands at $0.63149, with a breakout paving the way for a move towards $0.63357 and potentially $0.63568 if buyers maintain control. A sustained rally above these levels would indicate growing strength in the Australian dollar, driven by risk appetite and a softening U.S. dollar.
Conversely, immediate support is located at $0.62665, followed by $0.62438 and $0.62214. A decisive drop below these levels would expose AUD/USD to further losses, increasing the likelihood of a bearish reversal.
The preferred entry strategy is to buy above $0.62863, targeting $0.63253 as a take-profit level, while stop-loss is set at $0.62662 to manage downside risk.
Overall, the pair remains bullish above $0.62860, with a break above $0.63149 likely to confirm a stronger uptrend. However, traders should monitor price action closely, as a failure to hold above support levels could shift sentiment in favor of the bears.
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