- AUD/USD plunges to the 0.6230 zone during Monday's session, dragged by risk-off tone and strong Greenback.
- Markets brace for Tuesday’s RBA decision, with investors focused on forward guidance and inflation outlook.
- Bearish signals dominate across indicators; resistance builds near key short-term averages.
The AUD/USD pair plunged to its lowest levels in over three weeks during Monday’s North American session, slipping toward the 0.6230 area as the Australian Dollar (AUD) underperformed across the board. The bearish tone was fueled by resurgent US Dollar (USD) strength amid heightened trade tensions and broader risk aversion ahead of “Liberation Day.” With the Reserve Bank of Australia’s (RBA) policy decision looming on Tuesday, investors showed little appetite to hold AUD, especially as technical indicators aligned to the downside.
Daily digest market movers: Australian Dollar slumps amid tariff jitters, all eyes on RBA
- AUD/USD sank sharply toward the low-0.6200s on Monday as traders dumped risk-sensitive currencies in favor of the safe-haven US Dollar.
- The US Dollar regained ground, climbing back to the 104.40 area on the DXY, bolstered by fears of incoming US tariffs and fragile sentiment.
- Traders remain cautious ahead of Wednesday’s “Liberation Day,” when President Donald Trump is expected to announce reciprocal trade measures.
- Rising concern over China’s economic outlook continues to weigh on AUD, given Australia's export reliance on Chinese demand.
- Federal Reserve (Fed) officials maintain a patient stance, with policy expected to remain on hold for now despite inflationary risks from trade tensions.
- Investors await Tuesday’s RBA meeting, where the cash rate is likely to remain at 4.10%; forward guidance will be key.
- Recent data in Australia showed easing inflation and weakening labor demand, increasing the likelihood of policy easing in the coming months.
- CFTC data shows speculative short positions on AUD rising to multi-week highs, reflecting deepening bearish sentiment.
- Gold rallied to new record highs above $3,100 as market participants shifted away from equities and crypto into safer assets.
- Commodities-linked currencies like the Aussie remained under pressure despite hopes for further Chinese stimulus.
Technical analysis
AUD/USD extended its downside and traded near the 0.6230 region by the time of writing, marking a significant slide during the American session. The pair’s bearish structure remains intact, with momentum indicators confirming the pressure. The Moving Average Convergence Divergence (MACD) shows a fresh red bar and a negative crossover, while the Awesome Oscillator adds to the bearish signal. The 14-period Relative Strength Index (RSI) slipped toward the lower end of neutral territory, suggesting weakening momentum, while the Commodity Channel Index also printed a deeply negative reading.
All major moving averages, including the 10-day EMA and the 20, 100, and 200-day SMAs, slope downward, reinforcing the bearish setup. Immediate resistance is located near 0.6275, 0.6289, and 0.6290, while support appears limited below 0.6218, with the next key level eyed at 0.6187. Unless a shift in sentiment or policy triggers a turnaround, further losses remain on the table.
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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