Daily Price Outlook
During the European trading session, the AUD/USD currency pair has been flashing red and remains under pressure around the 0.6247 level, hitting an intra-day low of 0.6243.
However, the decline in the pair was mainly due to the tariff threats made by US President Donald Trump. As a result, the risk-sensitive AUD has been negatively impacted by increased market uncertainty, as traders react to growing concerns about potential tariffs.
Moreover, President Trump announced plans to impose 25% tariffs on imports from Mexico and Canada, with the aim of boosting US manufacturing.
Additionally, he revealed intentions to place tariffs on computer chips, pharmaceuticals, steel, aluminum, and copper. These actions have fueled risk aversion in the markets, contributing to the AUD/USD pair’s downward pressure.
US Dollar Strengthens Amid Trade Policy Uncertainty, Weighing on AUD/USD
On the US front, the broad-based US Dollar has been trading near 108.00 on the US Dollar Index (DXY), which tracks its value against six major currencies.
Traders are closely watching key economic data, including US Durable Goods Orders, Consumer Confidence, and the Richmond Fed Manufacturing Index, set to be released later on Tuesday.
These reports could affect market sentiment and the strength of the USD, which has been gaining due to uncertainty surrounding President Donald Trump’s trade policies. The US Dollar’s strength is keeping the AUD/USD pair under pressure.
Former Treasury Secretary Scott Bessent has proposed new tariffs on US imports, starting at 2.5%, with the possibility of these tariffs increasing to 20%.
Trump has also indicated that he wants tariffs "much bigger" than the 2.5% figure. This uncertainty about trade policies is causing risk aversion in the markets, which is benefiting the US Dollar and weighing on the Australian Dollar (AUD).
Despite Trump’s calls for immediate interest rate cuts, traders expect the Federal Reserve to hold interest rates steady at the 4.25%-4.50% range in its January meeting.
The uncertainty around trade policies, combined with mixed US economic data such as a drop in Services PMI and a rise in Manufacturing PMI, could keep inflationary pressures in check. This cautious sentiment is strengthening the USD, which continues to impact the AUD/USD pair negatively.
China's Economic Struggles Weigh on the Australian Dollar, Further Pressuring AUD/USD
On the other hand, the losses in the AUD/USD pair could be further worsened by the limited support from China’s fresh stimulus measures.
Despite efforts to boost its equity market, including a second round of long-term stock investment programs worth 52 billion Yuan ($7.25 billion), the Australian Dollar failed to benefit.
These measures were aimed at reviving the struggling Chinese economy, but they did not provide enough support to the AUD.
China’s economic troubles continue to weigh on the Australian Dollar. In 2024, China’s Industrial Profits dropped by 3.3% year-over-year, marking the third consecutive year of decline.
The continued contraction is mainly due to weak demand, deflationary pressures, and a long slump in the property sector. These ongoing challenges in China, a key trading partner for Australia, make it difficult for the AUD to gain strength.
As a result, the Australian Dollar remains under pressure, especially with the ongoing economic struggles in China and the lack of strong support from the stimulus measures.
AUD/USD – Technical Analysis
The Australian dollar (AUD/USD) is trading at $0.62517, down 0.63%, as selling pressure continues to dominate. The pair remains below the critical pivot point at $0.62640, suggesting a bearish outlook in the short term.
Immediate support lies at $0.62213, with further downside potential toward $0.61899 and $0.61648 if bearish momentum accelerates.
Resistance on the upside is capped at $0.62998, followed by $0.63302 and $0.63620. For bullish sentiment to regain traction, a decisive break above the pivot and the 50-EMA at $0.62848 is necessary.
However, the broader trend appears bearish, with the 50-EMA reinforcing downside pressure as it acts as a dynamic resistance.
The technical setup suggests continued weakness, particularly as the pair struggles to reclaim the pivot point at $0.62640. Traders are eyeing $0.62213 as a key level; a confirmed break below this support could invite further selling, targeting $0.61899.
Conversely, a bounce above the pivot could see the pair testing resistance levels, contingent on market sentiment and upcoming economic catalysts.
Traders should remain cautious, as the downward trajectory aligns with ongoing concerns over commodity-linked currencies amid fluctuating global risk sentiment.
A break below $0.62636 could confirm bearish continuation, while failure to sustain losses below key supports may lead to temporary relief.
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