- AUD/USD trades near the 0.6240 area in Thursday’s US session, extending gains amid renewed USD pressure.
- Tariff escalation with China and conflicting Fed commentary stoke fears of slower growth and persistent inflation.
- Despite Thursday’s recovery, AUD/USD remains technically bearish with the upside capped by key moving averages.
The Australian Dollar (AUD) extended its advance on Thursday, climbing toward the 0.6240 zone during the American session. The pair built on recent strength as the US Dollar Index (DXY) slid further toward multi-month lows near the 101 area. This move came after markets digested the White House’s confirmation of a steep 145% tariff on Chinese goods, combined with a cautious Federal Reserve (Fed) tone.
Despite the Greenback’s decline, the technical backdrop for AUD/USD remains tilted to the downside, with several key indicators continuing to flash bearish signals, even as the pair attempts to recover lost ground.
Daily digest market movers: Aussie up as US Dollar slips on Fed flags inflation risks, trade war
- The US Dollar (USD) extended its decline on Thursday, pressured by escalating trade tensions and softer inflation data. The DXY fell near the 101.00 handle as investors digested the latest tariff developments and cautious Fed rhetoric.
- President Trump’s 145% tariff on Chinese imports remains in effect, despite a temporary pause on some measures. Fed officials, including Goolsbee, Logan, and Schmid, warned that the tariff-induced price pressures could hurt consumer sentiment, hinder employment growth, and complicate monetary policy decisions.
- US initial jobless claims ticked slightly higher, reinforcing labor market cooling concerns. Meanwhile, the March CPI report revealed a sharp deceleration in both core and headline inflation, easing to multi-year lows.
- Equity markets gave back part of Wednesday’s gains, with the Dow retreating below 40,000 as sentiment turned more cautious. Meanwhile, Gold surged to fresh all-time highs and WTI crude reversed mid-week gains amid demand concerns.
- The Australian Dollar gained ground against the weakening US Dollar, even as the macro outlook for Australia remains fragile due to its exposure to Chinese demand, which is being dampened by tit-for-tat tariffs.
Technical analysis
Despite Thursday’s upward momentum, AUD/USD continues to face a technically bearish structure, with key resistance levels limiting further upside. The pair moved higher to trade in the upper half of the recent range, but its positioning remains vulnerable.
The Moving Average Convergence Divergence (MACD) indicator continues to print red bars, signaling lingering downside pressure. Meanwhile, the Relative Strength Index (RSI) sits at 48, suggesting neutral momentum with a slight bearish tilt. Both the Stochastic %K (at 37.57) and Commodity Channel Index (at -51.65) also display neutral tones, offering no clear directional bias.
The bearish sentiment is reinforced by a confluence of moving averages leaning against buyers. The 20-day, 100-day, and 200-day Simple Moving Averages all slope downward, sitting above current price action and capping gains. The 30-day EMA and SMA—hovering around 0.6230–0.6250—also suggest further resistance ahead.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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