Australian Dollar remains subdued due to concerns over Trump’s potential tariffs

• The Australian Dollar struggles due to concerns over potential tariffs on Chinese goods from US President-Elect Donald Trump.
• Australia's Westpac Consumer Confidence index increased by 5.3% in November, reaching 94.6 points.
• Traders await the US Consumer Price Index data release on Wednesday for insights into future US policy.

The Australian Dollar (AUD) depreciates against the US Dollar (USD) for the third consecutive session on Tuesday. Proposed tariff increases on Chinese goods by US President-Elect Donald Trump could negatively impact the AUD, as Australia is one of China’s largest exporters.

Australia's Westpac Consumer Confidence index rose by 5.3% to reach 94.6 points in November, marking its second consecutive month of improvement and the highest level in two and a half years. However, the index has remained below 100 for nearly three years, reflecting that pessimists still outnumber optimists.

Matthew Hassan, Senior Economist at Westpac, noted "Consumers are feeling less pressure on their family finances, are no longer worried about further interest rate rises, and are increasingly confident in the economic outlook."

The US Dollar continues to strengthen following the US election results that confirmed Trump’s victory. Analysts suggest that if Trump’s fiscal policies are implemented, they could boost investment, spending, and labor demand, raising inflation risks. This scenario might prompt the Federal Reserve (Fed) to adopt a more restrictive monetary policy, potentially strengthening the Greenback and putting added pressure on the AUD/USD pair.

Traders are awaiting the US inflation data release on Wednesday for insights into future US policy. The headline Consumer Price Index (CPI) is expected to show a 2.6% year-over-year increase for October, while the core CPI is projected to rise by 3.3%.

Daily Digest Market Movers: Australian Dollar depreciates amid concerns over Trump’s potential tariff

• Bloomberg News reported early Tuesday that Chinese regulators are planning to cut taxes on home purchases. According to the report, authorities are working on a proposal that would allow major cities to lower the deed tax for buyers to as low as 1%, down from the current maximum rate of 3%.
• The downside of the Australian Dollar could be restrained as the Reserve Bank of Australia (RBA) Governor Michele Bullock reiterated a hawkish stance after the interest rate decision last week, emphasizing the need for restrictive monetary policy given persistent inflation risks and a strong labor market.
• The AUD also struggled due to lower-than-expected Chinese Consumer Price Index (CPI) data released on Saturday. China’s Consumer Price Index (CPI) rose 0.3% year-over-year in October, slightly below market expectations and down from September’s 0.4%. This marks the ninth consecutive month of consumer price inflation but represents the lowest rate since June. Month-over-month, the CPI dropped by 0.3%, a sharper decline than the expected 0.1% decrease, following a flat reading in September.
• China's latest stimulus measures fell short of investor expectations, further dampening demand prospects for Australia’s largest trading partner and weighing on the Australian Dollar. China announced a 10 trillion Yuan debt package on Friday designed to alleviate local government financing pressures and support struggling economic growth. However, the package stopped short of implementing direct economic stimulus measures.
• Minneapolis Fed President Neel Kashkari stated on Sunday that the US economy has shown remarkable resilience as the Fed continues its efforts to curb inflation. However, Kashkari noted that the Fed is still “not all the way home.” He also mentioned that the Fed aims to be confident that inflation will fully return to the 2% target and needs additional evidence before considering another rate cut.
• Morgan Stanley divides the Trump administration's macroeconomic policies into three key areas: tariffs, immigration, and fiscal measures. The report predicts that tariff policies will be prioritized, with an anticipated immediate imposition of 10% tariffs globally and 60% tariffs specifically on China.
• On Thursday, Federal Reserve Chair Jerome Powell stated that he doesn’t anticipate Trump’s potential return to the White House impacting the Fed’s near-term policy decisions. “We don’t guess, speculate, and we don’t assume what future government policy choices will be,” Powell noted after the bank decided to lower interest rates by 25 basis points to a range of 4.50%-4.75%, as expected.
• Fed Chair Jerome Powell also emphasized that the Fed will continue to assess economic data to decide on the "pace and destination" of future rate changes, highlighting that inflation has been gradually slowing toward the Fed's 2% target.

Technical Analysis: Australian Dollar remains below the nine-day EMA near 0.6600

The AUD/USD pair trades around 0.6570 on Tuesday. An Analysis of the daily chart shows short-term downward pressure, as the pair remains below the nine-day Exponential Moving Average (EMA). Furthermore, the 14-day Relative Strength Index (RSI) consolidates below the 50 level, reinforcing the bearish outlook.

On the support side, the AUD/USD pair could test its three-month low of 0.6512, recorded on November 6. Further key psychological support is at 0.6500. 

To the upside, immediate resistance is found at the nine-day EMA at 0.6596, followed by the 14-day EMA at 0.6609. A break above these EMAs might push the AUD/USD pair toward its three-week high of 0.6687, with the next psychological target at 0.6700.

AUD/USD: Daily Chart