- AUD/USD trades around the 0.6000 region in Tuesday’s US session after trimming earlier losses within a volatile range.
- Renewed US-China tariff escalation stokes fears, but signs of global talks and Fed caution temper risk aversion.
- Mixed technical signals emerge; price trapped mid-range with bearish moving averages and oversold oscillators diverging.
The Australian Dollar staged a fragile bounce during Tuesday’s American session, holding near the 0.6000 zone after rebounding from session lows. This recovery came as the US Dollar’s earlier strength faded, helping risk currencies like the Aussie stabilize within their recent five-year low range. Market sentiment improved somewhat following reports that the US is in trade talks with dozens of countries, although China remains a clear outlier.
At the same time, the latest batch of tariff announcements from Washington — featuring a cumulative import duty exceeding 100% on Chinese goods — has kept downside pressure alive. On the technical front, AUD/USD remains tilted lower, but mixed signals across oscillators hint at potential short-term consolidation.
Daily digest market movers: Tariff showdown persists
- After a turbulent start to the week, sentiment improved on Tuesday following confirmation from the White House that tariffs on China took effect at noon EST. Despite the escalation, US officials revealed ongoing discussions with over 50 countries, suggesting a multilateral approach outside China’s scope.
- Fed officials expressed concern over the inflationary risks of widespread tariffs. San Francisco Fed’s Daly warned of rising price pressure, while Chicago’s Goolsbee underscored the limited flexibility for importers to navigate the new trade landscape.
- Despite retaliatory threats from Beijing, risk appetite returned as markets bet on potential breakthroughs in global negotiations. Equities pared losses, Gold dipped below the $3,000 mark, and the US Dollar Index (DXY) extended its pullback toward the 103.00 threshold.
- China’s Ministry of Commerce condemned Washington’s new tariff barrage as counterproductive, pledging a firm response. The comments reignited fears over Australia’s export vulnerability, especially given its reliance on China-bound goods.
- Meanwhile, the Reserve Bank of Australia remains under scrutiny, with increasing expectations of policy easing as trade headwinds continue to threaten the domestic outlook.
Technical analysis
AUD/USD is navigating a narrow range around the mid-point of its daily boundaries, showing hesitant movement after days of pronounced weakness. Price action remains bearish in the broader context, but intraday signals are becoming muddled.
The Moving Average Convergence Divergence (MACD) has printed another red bar, reinforcing the dominant downtrend. In contrast, the Relative Strength Index (RSI) remains stuck near 29, flashing oversold conditions and leaning toward a possible rebound. Adding complexity, the Commodity Channel Index (CCI) also supports a recovery, suggesting the pair may be primed for short-term upside correction.
However, trend indicators continue to weigh heavily on the pair. The 10-day Exponential Moving Average (EMA), alongside the 20-day, 100-day, and 200-day Simple Moving Averages (SMAs), all slope downward, offering no reprieve to bulls. The Average Directional Index (ADX) remains neutral, further supporting the notion of potential sideways movement rather than directional conviction.
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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