- AUD/USD trades below the 0.6300 zone after retreating from earlier highs.
- Tariff-driven optimism fades as the Trump administration unveils complex reciprocal trade measures.
- Resistance aligns near 0.6400 while the technical backdrop remains mixed.
On Wednesday's American session, the Australian Dollar pulled back after a brief spike to multi-day highs, with the AUD/USD pair slipping back under the 0.6300 threshold. The move followed a temporary boost in risk sentiment triggered by US President Donald Trump's tariff announcement, which was perceived as milder than feared. Technically, momentum remains conflicted as oscillators show divergence while the pair consolidates near familiar territory.
Markets initially welcomed the White House’s decision to impose a 10% blanket tariff on all imports and a 25% duty on automobiles, with implementation scheduled for April. The perception of a controlled rollout fueled a brief rebound in risk assets. However, once details revealed a layered, country-specific approach to tariffs—adding complexity to trade flows—investors turned cautious once again.
Meanwhile, the Reserve Bank of Australia (RBA) maintained its key rate at 4.10% earlier in the week. The RBA dropped its earlier signal about further easing but acknowledged persistent risks in both inflation and growth. RBA Governor Michele Bullock stressed caution and ruled out discussions of a rate cut for now, though markets still price in a high probability of easing at the May meeting.
Technical outlook: Mixed signals cap gains
The technical landscape is showing indecision. The Moving Average Convergence Divergence (MACD) is printing fresh red bars, suggesting bearish momentum. The Relative Strength Index (RSI), however, is rising and sits near the midpoint, indicating consolidation rather than clear trend direction.
On the upside, resistance levels are noted at 0.62978, 0.6304, and the psychological 0.6400 mark. The 20-, 100-, and 200-day Simple Moving Averages all lean bearish, reinforcing the idea that upside attempts may be capped unless a clear catalyst emerges.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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