CFD Market Analysis: AUDUSD Trading Rate

06.02.2025 10:42

AUD/USD: Can edge higher and test 0.6310 – UOB Group

While conditions remain overbought, AUD could edge higher and test 0.6310. A sustained rise above this level is unlikely. In the longer run, If AUD closes above 0.6310, it could trigger an advance to 0.6355, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Above 0.6310, AUD can trigger an advance to 0.6355

24-HOUR VIEW: “We noted yesterday that ‘there has been an increase in momentum, and today, a break above 0.6265 will not be surprising.’ However, we indicated that ‘overbought conditions suggest any further advance is unlikely to reach the major resistance at 0.6310.’ Our view was not wrong, as AUD rose to 0.6296, closing at 0.6285 (+0.45%). While conditions remain overbought, AUD could edge higher and test 0.6310 today. A sustained rise above this level seems unlikely. On the downside, support levels are at 0.6265 and 0.6245.”

1-3 WEEKS VIEW: “In our update from Tuesday (04 Feb, spot at 0.6215), we highlighted that the recent ‘buildup in downward momentum has largely faded.’ We expected AUD to ‘trade in a range, probably between 0.6080 and 0.6310.’ AUD edged higher to a high of 0.6296 yesterday (Wednesday). Upward momentum is beginning to build, and if AUD closes above 0.6310, it could trigger an advance to 0.6355. The chance of AUD closing above 0.6310 will increase in the coming days as long as 0.6200 (‘strong support’ level) is not breached.”

06.02.2025 08:46

AUD/USD remains weak as US-China trade tensions escalate with new tariffs

AUD/USD softens to around 0.6260 in Thursday’s early European session, down 0.44% on the day.
The RBA is expected to deliver a rate cut to 4.1%
The US January labor market report on Friday will be closely watched.

The AUD/USD pair weakens to near 0.6260 on Thursday during the European trading hours, pressured by rising fears over US-China trade war tensions and lower-than-expected Australian Trade Balance data. On Friday, all eyes will be on the US January labor market report, including the Nonfarm Payrolls (NFP), Unemployment Rate and Average Hourly Earnings.

Data released by the Australian Bureau of Statistics on Thursday showed that Australia’s trade surplus decreased to 5,085M MoM in December from 6,792M (revised from 7,079) in November. This reading came in lower than the 7,000M expected. Meanwhile, Exports rose by 1.1% MoM in December versus 4.2% (revised from 4.8%) prior. Imports climbed by 5.9% MoM in December, compared to 1.4% (revised from 1.7%) recorded in November.

Furthermore, the rising expectation that the Reserve Bank of Australia (RBA) will cut its interest rates for the first time since November 2020 contributes to the AUD’s downside. Money markets are now pricing in nearly a 95% chance of a rate cut from the current 4.35% to 4.10%.

Additionally, US President Donald Trump opens the door to significantly higher tariffs on other trade partners, such as the Eurozone and China. This, in turn, exerts some selling pressure on the China-proxy Australian Dollar (AUD) as China is a major trading partner to Australia.

The strength of the US Dollar is likely to persist over the coming quarters due to the hawkish stance of the US Federal Reserve (Fed). However, the US economic data released on Friday will be the highlight. Any signs of weaker labor marker conditions could drag the USD lower and help limit the pair’s losses.

Australian Dollar FAQs

What key factors drive the Australian Dollar?

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.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

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.

How does the health of the Chinese Economy impact the Australian Dollar?

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.

How does the price of Iron Ore impact the Australian Dollar?

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.

How does the Trade Balance impact the Australian Dollar?

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.

05.02.2025 11:47

AUD/USD soars to near 0.6300 as market sentiment turns cheerful

AUD/USD rallies to near 0.6300 as the market sentiment becomes favorable for risk-sensitive assets.
The risk-appetite of investors improves on the assumption that the scope of the trade war will be limited between the US and China.
US-China trade war and RBA dovish bets would limit the Australian Dollar’s upside.

The AUD/USD pair surges to near the key level of 0.6300 in Wednesday’s European session. The Aussie pair strengthens as the risk appetite of investors has improved amid expectations that the trade war won’t be global and will be limited between the United States (US) and China.

S&P 500 futures are slightly down in European trading hours but have recovered their losses significantly. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, declines sharply to near 107.50, the lowest level in more than a week.

Market participants are anticipating a lethal trade war between the US and China as the latter has retaliated with levies of 15% on coal and LNG and 10% for crude oil, farm equipment, and some autos against US President Donald Trump’s decision to impose 10% tariffs on them.

Though a steady market environment has offered some relief to the Australian Dollar (AUD), investors expect the relief would be short-term as Australia would be the victim of the US-China trade war, being a leading trading partner of China.

Apart from that, firm market expectations that the Reserve Bank of Australia (RBA) will pivot to policy normalization from the policy meeting on February 18 would also weigh on the Australian Dollar.

In Wednesday’s session, investors will focus on the US ADP Employment Change and the ISM Services Purchasing Managers’ Index (PMI) data for January.

US-China Trade War FAQs

What does “trade war” mean?

Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.

What is the US-China trade war?

An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.

Trade war 2.0

The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.

05.02.2025 09:35

AUD/USD: Unlikely to reach the major resistance at 0.6310 – UOB Group

Australian Dollar (AUD) could break above 0.6265; any further advance is unlikely to reach the major resistance at 0.6310. In the longer run, downward momentum has largely faded; AUD is expected to trade in a range between 0.6080 and 0.6310, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Downward momentum has largely faded

24-HOUR VIEW: "Yesterday, when AUD was at 0.6215, we were of view that it 'could rise, but any advance is likely part of a higher 0.6155/0.6265 range.' We were also of the view that AUD 'is not expected to break clearly above 0.6265.' AUD then dipped briefly to 0.6171, rose to a high of 0.6262 before closing at 0.6257 (+0.47%). There has been an increase in momentum, and today, a break above 0.6265 will not be surprising. However, overbought conditions suggest any further advance is unlikely to reach the major resistance at 0.6310 (there is another resistance level at 0.6285). To maintain the momentum, AUD must remain above 0.6200 (minor support is at 0.6225)." 1-3 WEEKS VIEW: "Our update from yesterday (04 Feb, spot at 0.6215) still stands. As highlighted, the buildup in downward momentum from Monday “has largely faded.” For now, AUD is expected to trade in a range, probably between 0.6080 and 0.6310."

04.02.2025 13:42

AUD/USD Price Forecast: Recovers above 0.6200 as US Dollar gives up gains

AUD/USD bounces back above 0.6200 as the US Dollar surrenders its intraday gains.
US Trump’s decision to delay tariffs on Canada and Mexico has resulted in a decline in USD’s risk premium.
China has retaliated with tariffs on the US, which would take place from February 10.

The AUD/USD pair rebounds sharply above the round-level figure of 0.6200 in Tuesday’s North American session. The Aussie pair recovers as the US Dollar (USD) gives up its intraday gains on the back of United States (US) President Donald Trump’s decision to push the order to impose 25% tariffs on Canada and Mexico on hold for 30 days. This scenario has resulted in a decline in the risk-premium of the US Dollar, given its safe-haven feature.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, drops to near 108.50 after a short-lived recovery move to near 109.00.

However, Trump’s decision to put 10% tariffs on China has come into effect, which keeps fears of a trade war intact. In retaliation, China has also announced tariffs on the US, which will be executed in February. This has negatively impacted the Australian Dollar’s (AUD) outlook, given that the currency is a proxy for China’s economic status.

Investors expect that an absence of immediate execution of tariffs by China suggests that the economy is continuing to negotiate with Trump.

This week, the major trigger for the US Dollar will be the US Nonfarm Payrolls (NFP) data for January, which will be released on Friday. Market participants expect the official employment data to influence speculation for the Federal Reserve’s (Fed) monetary policy guidance.

AUD/USD posts a fresh four-year low around 0.6100. The 20-week Exponential Moving Average (EMA) near 0.6375 slopes downwards, suggesting that the overall trend is bearish. The 14-week Relative Strength Index (RSI) oscillates inside the 20.00-40.00 range, indicating a strong bearish momentum.

More downside would appear if the pair breaks below the immediate support of 0.6100, which would let it towards the psychological support of 0.6000 and 26 March 2020 low of 0.5870.

On the flip side, a sustenance move above the January 13 high of 0.6330 will open doors to the round-level resistance of 0.6400 and the December 5 high of 0.6456

AUD/USD weekly chart

Australian Dollar FAQs

What key factors drive the Australian Dollar?

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.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

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.

How does the health of the Chinese Economy impact the Australian Dollar?

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.

How does the price of Iron Ore impact the Australian Dollar?

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.

How does the Trade Balance impact the Australian Dollar?

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.

04.02.2025 09:00

AUD/USD: Downward momentum fades – UOB Group

AUD could rise, but any advance is likely part of a higher 0.6155/0.6265 range. In the longer run, downward momentum has largely faded; AUD is expected to trade in a range between 0.6080 and 0.6310, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Any advance is likely part of a higher 0.6155/0.6265 range

24-HOUR VIEW: “We indicated yesterday that ‘the sharp plunge today appears to be overdone.’ We pointed out that ‘there is a chance for AUD to drop further, but given the deeply oversold conditions, a sustained decline below 0.6080 appears unlikely today.’ AUD fell less than expected to 0.6089 before staging a sharp rally, reaching a high of 0.6237 in the late NY session. Today, AUD could rise, but any advance is likely part of a higher 0.6155/0.6265 range. In other words, we do not expect AUD to break clearly above 0.6265.”

1-3 WEEKS VIEW: “While we indicated yesterday (03 Feb, spot at 0.6140) that AUD ‘is under pressure’, we also indicated that ‘it is too early to determine if there is enough momentum for AUD to drop towards the significant support level at 0.6000.’ AUD subsequently dropped to 0.6089 before reversing sharply, breaking above our ‘strong resistance’ level of 0.6230 (high has been 0.6237). Downward momentum has largely faded. For now, we expect AUD to trade in a range, probably between 0.6080 and 0.6310.”

03.02.2025 11:47

AUD/USD Price Forecast: Posts fresh four-year low near 0.6100

AUD/USD refreshes four-year low near 0.6100 as US President Trump imposes 10% tariffs on China.
The RBA is widely anticipated to start reducing interest rates from the policy meeting this month.
The US Dollar strengthens as US Trump starts global trade war.

The AUD/USD pair recovers slightly after plummeting to a fresh four-year low near 0.6100 but is still more than 1.10% down in Monday’s European session. The Aussie pair faces a sharp sell-off as Antipodeans pay the cost of being leading trading partners of China.

Over the weekend, United States (US) President Donald Trump imposed 10% tariffs on China and 25% on Canada and Mexico. This led to a sharp decline in the appeal of the Australian Dollar (AUD), which is a proxy for China’s economic outlook.

Apart from US tariffs on China, the Australian Dollar (AUD) has also weakened on the domestic front amid growing expectations that the Reserve Bank of Australia (RBA) will pivot to policy normalization from the policy meeting on February 18.

Meanwhile, the US Dollar (USD) has strengthened as Trump’s tariffs has improved its safe-haven appeal. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, climbs above 109.50.

In Monday’s session, investors will focus on the US ISM Manufacturing PMI for January, which will be published at 15:00 GMT.

AUD/USD posts a fresh four-year low around 0.6100. The 20-week Exponential Moving Average (EMA) near 0.6375 slopes downwards, suggesting that the overall trend is bearish. The 14-week Relative Strength Index (RSI) oscillates inside the 20.00-40.00 range, indicating a strong bearish momentum.

More downside would appear if the pair breaks below the immediate support of 0.6100, which would let it towards the psychological support of 0.6000 and 26 March 2020 low of 0.5870.

On the flip side, a sustenance move above the January 13 high of 0.6330 will open doors to the round-level resistance of 0.6400 and the December 5 high of 0.6456

AUD/USD weekly chart

US-China Trade War FAQs

What does “trade war” mean?

Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.

What is the US-China trade war?

An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.

Trade war 2.0

The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.

03.02.2025 11:12

AUD/USD to drop further – UOB Group

Chance for Australian Dollar (AUD) to drop further; given the deeply oversold conditions, a sustained decline below 0.6080 appears unlikely today. In the longer run, AUD is under pressure; it is too early to determine if there is enough momentum for it to drop towards 0.6000, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Not enough momentum for AUD to drop towards 0.6000

24-HOUR VIEW: “While further AUD declines appear likely in the coming days, the sharp plunge today appears to be overdone. That said, there is a chance for AUD to drop further, but given the deeply oversold conditions, a sustained decline below 0.6080 appears unlikely today. The 0.6045 support level is also unlikely to come under threat. On the upside, any recovery is likely to remain below 0.6205, with 0.6185 providing strong resistance.”

1-3 WEEKS VIEW: “After recovering to a high of 0.6330 late last month, AUD fell sharply. Today, it fell below last month’s low of 0.6131, reaching levels not seen since Apr 2020. The price action suggests further AUD weakness, but it is too early to determine if there is enough momentum for AUD to drop towards the significant support level at 0.6000. Overall, we expect AUD to remain under pressure, as long as it remains below 0.6230.”

02.02.2025 23:22

AUD/USD falls to near 0.6150 after Trump sets tariffs

AUD/USD weakens to around 0.6155 in Monday’s early Asian session, down 0.95% on the day.
The White House planned 25% tariffs on Mexico, Canada; 10% on China from Tuesday.
The rising expectation of RBA rate cuts weighs on the Aussie.

The AUD/USD pair attracts some sellers to near 0.6155 during the early Asian session on Monday. The weakening of the Australian Dollar (AUD) is pressured by US President Donald Trump’s threat to hit China, Canada, and Mexico with tariffs. Later on Monday, China’s Caixin Manufacturing Purchasing Managers Index (PMI) for January will be released.

On Saturday, the White House said that it will impose tariffs of 25% on goods coming from Canada and Mexico while hitting China with a 10% levy, starting Tuesday, per Bloomberg. Canada, Mexico and China vowed to respond to sweeping new tariffs on their exports to the US. China’s foreign ministry noted tariffs will inevitably affect future cooperation on drug control. Trump tariff threats exert some selling pressure on China-proxy Aussie as China is a major trading partner of Australia.

Furthermore, rising bets that the Reserve Bank of Australia (RBA) will cut the interest rate might contribute to the AUD’s downside. According to the Bloomberg survey on Friday, Twenty of 23 respondents expect the RBA will lower its cash rate to 4.10% on February 18. Financial markets are now pricing in nearly 90% odds of a reduction.

Traders brace for the release of China’s January Caixin Manufacturing PMI, which is due later on Monday. If the report shows a stronger-than-expected outcome, this could help limit the AUD’s losses.

Australian Dollar FAQs

What key factors drive the Australian Dollar?

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.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

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.

How does the health of the Chinese Economy impact the Australian Dollar?

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.

How does the price of Iron Ore impact the Australian Dollar?

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.

How does the Trade Balance impact the Australian Dollar?

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.

31.01.2025 16:17

AUD/USD edges higher despite tariff concerns

Trump reiterates tariff threats on Mexico, Canada, and China.
Fed maintains cautious stance on inflation risks, holding rates steady.
AUD/USD hovers near 0.6215 amid RBA rate cut bets and China’s economic slowdown.

The AUD/USD pair trades slightly higher at 0.6215 in the Asian session on Friday but remains under pressure due to fresh tariff threats from US President Trump. Market participants continue to anticipate a dovish shift from the Reserve Bank of Australia (RBA) in February, adding to the Aussie’s downside risks.

Trade tensions weigh on sentiment

Trump reaffirmed plans to impose tariffs on Mexico, Canada, and China, fueling safe-haven demand for the US Dollar and claiming to plan to impose 100% tariffs on BRICS nations if they try to replace the US Dollar (USD) with a new currency in international trade. Trump posted on TruthSocial: “We are going to require a commitment from these seemingly hostile countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty US Dollar or, they will face 100% tariff,

On the data front, the US Core Personal Consumption Expenditures (PCE) Price Index rose 0.2% month-on-month as expected, while annual core PCE remained unchanged at 2.8%. Fed officials, including Governor Michelle Bowman, warned of lingering upside inflation risks, reinforcing expectations that rate cuts could be delayed.

In Australia, the latest data reinforced expectations that the RBA will pivot to policy easing. Q4 inflation figures came in lower than anticipated, with trimmed mean CPI easing to 3.2%, below the RBA’s previous forecast of 3.4%. Traders now fully price in a 25-basis-point rate cut at the February meeting.

Technical overview

AUD/USD remains range-bound, lacking strong directional momentum. The Relative Strength Index (RSI) is at 47, still in negative territory but recovering. The MACD histogram shows decreasing green bars, suggesting fading bullish momentum.
Immediate resistance is seen at 0.6230 at the the 20-day Simple Moving Average (SMA). On the downside, key support lies at 0.6200, with a break lower opening the door to further declines toward 0.6170. Until a decisive move occurs, the pair is likely to consolidate within the current range.

31.01.2025 10:56

AUD/USD Price Forecast: Falls back as US Dollar refreshes weekly high

AUD/USD gives up some intraday gains as the US Dollar posts a fresh weekly high amid Donald Trump’s tariff fears.
Donald Trump is poised to impose 25% tariffs on Canada and Mexico, and 100% on BRICS.
Investors expect the RBA to pivot to a policy-easing stance from February.

The AUD/USD pair surrenders a majority of intraday gains after facing selling pressure above 0.6230 in Friday’s European session but is still almost 0.2% higher at the press time. The Aussie pair retreats as the US Dollar (USD) strengthens amid deepening risks of a global trade war, with United States (US) President Donald Trump threatening to impose hefty tariffs on BRICS, and other North American nations.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, posts a fresh weekly high near 108.35.

Market participants expect higher tariffs would result in an acceleration in inflationary pressures on the assumption that the scenario will boost production domestically, which will increase labor demand and, eventually, wage growth. Such a scenario will allow the Federal Reserve (Fed) to hold interest rates at their current levels for longer.

Meanwhile, investors have underpinned the Australian Dollar (AUD) against the US Dollar even though traders have fully priced in the fact that the Reserve Bank of Australia (RBA) will start reducing interest rates from the policy meeting in February. Analysts at ANZ expect that a “sharper-than-expected” slowdown in inflation would provide the RBA with enough confidence to lower its Official Cash Rate by 25 basis points (bps) at its next meeting.

AUD/USD corrects to near 0.6200 after failing to extend the 11-day recovery above 0.6330 from an over-four-year low of 0.6130. The pair rebounded after a divergence in momentum and price action. The 14-period Relative Strength Index (RSI) formed a higher low, while the pair made lower lows on a four-hour timeframe.

The asset has also returned below the 50-period Exponential Moving Average (EMA), which trades around 0.6246.

Going forward, the pair would resume its downside journey if it fails to hold the January 13 low of 0.6130. This will push it lower to the round-level support of 0.6100 and the April 2020 low of 0.5990.

On the flip side, a sustenance move above the January 13 high of 0.6330 will open doors to the round-level resistance of 0.6400 and the December 5 high of 0.6456

AUD/USD four-hour chart

Australian Dollar FAQs

What key factors drive the Australian Dollar?

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.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

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.

How does the health of the Chinese Economy impact the Australian Dollar?

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.

How does the price of Iron Ore impact the Australian Dollar?

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.

How does the Trade Balance impact the Australian Dollar?

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.

30.01.2025 16:15

AUD/USD neutral as US GDP data misses expectations

US Q4 GDP growth slows to 2.3%, missing estimates of 2.6%.
Fed holds rates at 4.25%-4.50%, maintaining cautious stance on inflation progress.
AUD/USD stands soft around 0.6235, RBA rate cut expectations limits upside.

The AUD/USD pair stands neutral around 0.6235 on Thursday, struggling to gain traction ahead of the US Q4 GDP data release. The Federal Reserve opted to keep interest rates steady but maintained a cautious tone, expressing concerns over stalled disinflation progress. Meanwhile, the Reserve Bank of Australia (RBA) is widely expected to shift toward a policy-easing stance in the coming month, further weighing on the Aussie.

US GDP misses forecasts, Fed holds rates steady

The latest US economic data showed that growth slowed in the final quarter of 2024. Preliminary figures revealed that GDP expanded at an annualized pace of 2.3%, falling short of the 2.6% consensus and marking a notable drop from the 3.1% growth seen in the previous quarter. The Personal Consumption Expenditures (PCE) price index jumped to 2.3%, reflecting stronger inflationary pressures, while core PCE remained steady at 2.2%, below expectations of 2.5%.
Additionally, US jobless claims declined more than expected, with initial claims falling to 207,000 from 223,000 the previous week, reinforcing the Fed’s cautious stance on potential rate cuts. The central bank left rates unchanged as anticipated but removed language about inflation progress toward the 2% target, signaling a more watchful approach. Fed Chair Jerome Powell later clarified that this change was not intended to send a signal about policy direction, which slightly softened the initial hawkish interpretation.

Investors are closely monitoring upcoming economic data, particularly the US Personal Consumption Expenditures (PCE) report on Friday, for further clues on the Fed’s policy trajectory. Meanwhile, sentiment around the Aussie remains weak as RBA rate cut bets intensify, with analysts at ANZ predicting a 25-basis-point reduction in February.

Technical overview

AUD/USD remains range-bound, showing limited upside momentum. The Relative Strength Index (RSI) sits at 47, still in negative territory but rising. Meanwhile, the MACD histogram prints green bars, hinting at potential upside correction.

Key resistance stands at 0.6250. On the downside, 0.6200 serves as key support, with a break below opening the door toward 0.6170. Until a clear breakout occurs, the pair is likely to remain in consolidation mode.

AUD/USD daily chart

30.01.2025 11:50

AUD/USD consolidates around 0.6220 as US Q4 GDP takes centre stage

AUD/USD trades sideways above 0.6200 ahead of US Q4 GDP data.
The Fed guided a cautious stance on interest rates amid fears of stalling disinflation trend.
Market participants are confident that the RBA will pivot to policy-easing next month.

The AUD/USD pair trades in a tight range around 0.6220 in Thursday’s European session. The Aussie pair struggles for a direction, following the footprints of the US Dollar (USD), which is lacklustre after the Federal Reserve’s (Fed) monetary policy announcement in which it kept interest rates steady in the range of 4.25%-4.50%.

The Fed was already anticipated to maintain status quo as progress in the disinflation trend towards the central bank’s target of 2% has slowed. In the press conference, Fed Chair Jerome Powell guided to hold interest rates at their current levels until the central bank sees "real progress on inflation or at least some weakness in the labor market”.

Meanwhile, investors await the United States (US) Q4 Gross Domestic Product (GDP) data, which will be published at 13:30 GMT.

Economists expect the US economy to have expanded at an annualized rate of 2.6%, slower than 3.1% growth seen in the third quarter of 2024. Signs of strong GDP growth would add to expectations that the Federal Reserve (Fed) will keep interest rates at their current levels for longer. On the contrary, signals of slower growth rate are unlikely to impact expectations for Fed’s interest rate stance as investors see US President Donald Trump’s economic agenda as pro-growth and inflationary for the economy.

On the Aussie front, the Australian Dollar (AUD) performs weakly amid growing expectations that the Reserve Bank of Australia (RBA) will start reducing interest rates from the policy meeting in February. Analysts at ANZ said that a “sharper-than-expected” slowdown in inflation would provide the RBA with enough confidence to lower its Official Cash Rate by 25 basis points (bps) at its next meeting.

29.01.2025 19:10

AUD/USD declines as Fed’s hawkish stance weighs on Aussie

Federal Reserve leaves rates unchanged at 4.25%-4.50% as expected.
Fed statement removes prior language on inflation progress, signaling a cautious approach.
AUD/USD drops to 0.6220 as the US Dollar strengthens post-Fed decision.

The AUD/USD pair extended its decline on Wednesday, falling to 0.6220 following the Federal Reserve’s policy decision.

As widely anticipated, the Fed left interest rates unchanged at 4.25%-4.50%, but the statement carried a hawkish tone. Notably, policymakers removed prior language indicating that inflation had made progress toward the 2% target, signaling a more cautious outlook on future rate cuts. The US Dollar strengthened immediately after the announcement, pressuring the Aussie lower. All eyes are now on Jerome Powell's presser.

Technical overview

The AUD/USD remains under selling pressure, with the pair struggling to regain momentum. The Relative Strength Index (RSI) hovers in negative territory, reflecting bearish sentiment. Meanwhile, the MACD histogram prints rising green bars, suggesting some divergence. Key support lies at 0.6200, with a break below exposing 0.6170. On the upside, resistance is seen at 0.6230 (20-day Simple Moving Average).

AUD/USD daily chart

29.01.2025 15:46

AUD/USD slides as weak inflation data fuels RBA rate cut bets

Australian inflation missed expectations, reinforcing RBA rate cut speculation.
US-China trade tensions keep pressure on the Aussie.
Markets await the Fed’s decision for further direction.

The AUD/USD dropped by 0.57% to 0.6225 on Wednesday, struggling near weekly lows below 0.6250. Softer-than-expected inflation data from Australia strengthened expectations of a February rate cut by the Reserve Bank of Australia (RBA), putting additional pressure on the Aussie. Weak economic signals from China and escalating US-Sino trade tensions further dampened sentiment, while investors awaited the Federal Reserve’s policy decision later in the day.

Market sentiment remains cautious as investors await the Federal Reserve's (Fed) highly anticipated monetary policy decision. While the central bank is widely expected to keep interest rates steady, market participants are keen to gauge its stance on future rate cuts. Any hawkish tilt from the Fed, emphasizing persistent inflation risks or delaying policy easing, could drive further strength in the US Dollar, pressuring the AUD/USD lower.

At the same time, Australia’s inflation figures came in below expectations, adding to speculation that the RBA will ease monetary policy in its upcoming meeting. The latest data showed that quarterly inflation rose by just 0.2%, missing the projected 0.3%. On an annual basis, inflation slowed to 2.4%, down from 2.8% in the previous quarter and below the expected 2.5%. While December’s Monthly CPI increased by 2.5%, as forecasted, it remained within the RBA’s 2%-3% target range.
Adding to the Aussie’s challenges, concerns over potential US tariffs on Chinese goods continue to mount. White House Press Secretary Karoline Leavitt reiterated that President Donald Trump is still considering imposing 10% tariffs on China, with a decision expected in February.

Technical overview

The AUD/USD remains under pressure, trading within a tight range as it struggles to recover. The Relative Strength Index (RSI) stands at 43, sharply declining in negative territory, indicating sustained bearish momentum. Meanwhile, the MACD histogram prints green bars but declinig, signaling some bullish presence.
Despite recent losses, technical indicators suggest mixed signals. The MACD hints at potential upside, while the RSI remains bearish. If the pair fails to reclaim the 20-day Simple Moving Average (SMA) at 0.6230, selling pressure could intensify. Immediate support is seen at 0.6200, with a break lower exposing 0.6170. Resistance remains at 0.6250, followed by 0.6300.

AUD/USD daily chart

29.01.2025 11:31

AUD/USD slumps to near 0.6220 on soft Aussie CPI, Fed policy in focus

AUD/USD declines to near 0.6220 as soft Australian CPI data has boosted RBA dovish bets.
Year-on-year Australian CPI rose at a slower pace of 2.4% in the last quarter of 2024.
The Fed is certain to announce a pause in the current policy-easing spell.

The AUD/USD pair falls sharply to near 0.6220 in Wednesday’s European session. The Aussie pair faces sharp selling pressure as the Australian Dollar (AUD) weakens across the board after the release of the softer-than-projected Australian Q4 Consumer Price Index (CPI) data, which fuelled bets supporting the Reserve Bank of Australia (RBA) to start reducing interest rates from the policy meeting in February.

Australian Dollar PRICE Today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.25%	0.16%	-0.08%	0.17%	0.42%	0.35%	0.20%
EUR	-0.25%		-0.09%	-0.32%	-0.09%	0.17%	0.12%	-0.05%
GBP	-0.16%	0.09%		-0.25%	0.00%	0.26%	0.20%	0.04%
JPY	0.08%	0.32%	0.25%		0.24%	0.50%	0.42%	0.28%
CAD	-0.17%	0.09%	-0.01%	-0.24%		0.25%	0.19%	0.04%
AUD	-0.42%	-0.17%	-0.26%	-0.50%	-0.25%		-0.06%	-0.22%
NZD	-0.35%	-0.12%	-0.20%	-0.42%	-0.19%	0.06%		-0.16%
CHF	-0.20%	0.05%	-0.04%	-0.28%	-0.04%	0.22%	0.16%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

Australian Bureau of Statistics reported that inflationary pressures rose at a steady pace of 0.2% in the last quarter of 2024 on a sequential basis, slower than estimates of 0.3%. Compared to the same quarter of the previous year, inflation rose at a slower pace of 2.4% than expectations of 2.5% and 2.8% growth in the third quarter of 2024. However, the Monthly CPI grew at a faster pace of 2.5% in December, as expected, compared to a 2.3% increase in November, but is broadly inside the RBA’s range of 2%-3%.

Soft Australian inflation data have boosted market expectations that the RBA will pivot to policy easing at its next policy meeting.

Meanwhile, deepening fears that United States (US) President Donald Trump will impose 10% tariffs on China has also kept the Aussie Dollar on the backfoot, being Australia a leading trading partner of China. On Tuesday, White House Press Secretary Karoline Leavitt reported that the President is “very much still considering 10% tariffs on China” from February 1.

On the US Dollar (USD) front, investors await the Federal Reserve’s (Fed) monetary policy decision, which will be announced at 19:00 GMT. The Fed is widely anticipated to keep interest rates steady in the range of 4.25%-4.50%.

Australian Dollar FAQs

What key factors drive the Australian Dollar?

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.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

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.

How does the health of the Chinese Economy impact the Australian Dollar?

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.

How does the price of Iron Ore impact the Australian Dollar?

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.

How does the Trade Balance impact the Australian Dollar?

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.

29.01.2025 10:15

AUD/USD is underperforming at the moment – BBH

Australia’s Q4 CPI was soft and all but locks-in an RBA rate cut at the next meeting February 18, BBH FX strategists report.

Sluggish Chinese economic activity to weigh on AUD/USD

“Headline CPI matched consensus at 2.5% y/y vs. 2.8% in Q3, reflecting large falls in electricity (-25.2%) and Automotive fuel (-7.9%). The more policy-relevant trimmed mean CPI inflation undershot expectations eased to a three-year low at 3.2% y/y (consensus: 3.3%, RBA projection: 3.4%) vs. 3.6% in Q3.”

“Markets moved to virtually fully price-in (vs. 80% yesterday) a 25bps RBA cut to 4.10% in February and a total of 85bps of easing over the next 12 months. RBA/Fed policy trend and sluggish Chinese economic activity can further weigh on AUD/USD.”

29.01.2025 09:37

AUD/USD: Currently a pullback is under way – Societe Générale

AUD/USD briefly challenged lows of 2022 near 0.6170/0.6130 but has quickly rebounded, Societe Générale’s FX analysts report.

Break above MA near 0.6310 can lead to a larger bounce

“It has crossed above the upper limit of a steep down sloping channel. The rebound has so far remained contained near 50-DMA (now at 0.6310). Currently a pullback is under way, but it will be interesting to see if the pair can carve out a higher trough than 0.6130. Overcoming the MA near 0.6310 can lead to a larger bounce.”

28.01.2025 20:28

AUD/USD slides on trade tensions, awaits Fed and Australian CPI

Aussie pair falls 0.80% to 0.6245 on Tuesday, testing 0.6250 support.
Trump’s universal tariff plan on Colombia rattles markets, fueling risk aversion.
Fed set to hold rates at 4.25%-4.50% on Wednesday; investors eye forward guidance.
Australia’s Q4 CPI in focus with subdued inflation likely to bolster RBA rate cut bets.

AUD/USD extends its losing streak near 0.6250 as US President Trump’s proposed incremental tariffs on Colombia heighten trade war anxieties. The Federal Reserve (Fed) is widely expected to keep its benchmark rate steady midweek, although markets remain on edge about the central bank’s policy stance amid Trump’s push for immediate cuts. Meanwhile, the Aussie struggles under persistent speculation of RBA easing, and a moderate US Dollar recovery in the face of deepening risk-off sentiment.

Daily digest market movers: Aussie fell as the US Dollar recovered on a sour market mood

President Trump endorsed a universal 2.5% levy on Colombia, which could climb monthly up to 20%. Investors see the plan as granting leverage in potential renegotiations, hence the rise in safe-haven demand for the Greenback.
Sentiment soured further after China’s DeepSeek demonstrated affordable AI success, spurring a tech sector shakeout and driving up USD’s safe-haven appeal.
Fed decision on deck as it is set to leave rates at 4.25%-4.50% on Wednesday. Traders will comb through policymakers’ remarks, especially given Trump’s calls for quick rate cuts.
Australia’s CPI will be pivotal as the fourth-quarter inflation is seen slowing to 2.5% YoY (from 2.8%), whereas quarterly CPI growth could rise to 0.3% (versus Q3’s 0.2%). A weak figure might amplify chatter of the RBA unwinding its restrictive policy in February.
Domestically, the RBA remains poised for a potential February rate cut if inflation persists below target and the economy fails to pick up steam.

AUD/USD technical outlook: Indicators diverge in a narrow trading range

The AUD/USD declined to 0.6245 on Tuesday, hovering within a tight 0.6230-0.6300 corridor. Technical cues are mixed: the Moving Average Convergence Divergence (MACD) histogram displays rising green bars, hinting at underlying bullish pressure.

Yet the Relative Strength Index (RSI) stands at 49 in negative territory, down sharply — signaling an ongoing lack of conviction. This mismatch underscores market indecision with traders awaiting pivotal data releases (the Fed’s policy decision and Australia’s CPI) for clearer direction before adopting more aggressive positions.

US-China Trade War FAQs

What does “trade war” mean?

Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.

What is the US-China trade war?

An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.

Trade war 2.0

The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.

28.01.2025 14:44

AUD/USD plummets below 0.6250 as US Dollar strengthens amid dismal market mood

AUD/USD falls sharply as the US Dollar surges on multiple tailwinds.
Market sentiment is quite cautious amid a sell-off in global technology stocks on DeepSeek concerns.
Investors await the Fed’s policy meeting and the Australian CPI data, which will be released on Wednesday.

The AUD/USD pair plunges below 0.6250 on Tuesday. The Aussie pair weakens as the US Dollar (USD) performs strongly in a highly risk-off market environment. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps to near 108.00.

Market sentiment is quite risk-averse as global technology stocks have faced a massive sell-off on Chinese DeepSeek’s success in building an affordable Artificial Intelligence (AI) model, unlike top chatbots, such as OpenAI and Meta, which rely on high energy and sophisticated chips. This has resulted in an increase in the US Dollar’s safe-haven demand.

The US Dollar is also performing strongly on the back of growing uncertainty over United States (US) President Donald Trump’s tariff agenda and the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.

US Treasury Secretary Scott Bessent has proposed 2.5% tariff universally, as starters, which will increase at the same pace every month until they reach to 20%, as guided by Trump. Market participants expect that Bessent’s gradual tariff hike approach would allow Trump to negotiate in a better position.

Meanwhile, the Fed is widely anticipated to keep interest rates steady in the range of 4.25%-4.50%. Investors will keenly focus on Fed’s guidance on the monetary policy outlook for the entire year.

On the Aussie front, investors will pay close attention to the Australia Consumer Price Index (CPI) data for December and the fourth quarter of 2024. Compared to the similar quarter of the previous year, the CPI rose by 2.5%, slower than 2.8% in the previous quarter. Quarter-on-quarter CPI is estimated to have grown by 0.3%, faster than 0.2% in the third quarter of 2024.

The inflation data will significantly influence market expectations about when the Reserve Bank of Australia (RBA) will start reducing interest rates. Meanwhile, traders are pricing in a 25-basis points (bps) interest rate reduction in the February’s policy meeting.

Risk sentiment FAQs

What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

What are the key assets to track to understand risk sentiment dynamics?

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

Which currencies strengthen when sentiment is "risk-on"?

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

Which currencies strengthen when sentiment is "risk-off"?

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

CFD Trading Rate Australian Dollar vs US Dollar (AUDUSD)

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Above 0.6310, AUD can trigger an advance to 0.6355