Australian Dollar loses ground as US Dollar appreciates due to Trump’s tariff threat

• The Australian Dollar depreciates as traders adopt caution due to concerns over Donald Trump’s proposals to raise tariffs.
• The AUD/USD pair appreciated more than 1% on Thursday, as the Fed announced a 25 basis point rate cut.
• Fed Chair Jerome Powell emphasized that the central bank will continue to assess economic data to decide future rate changes.

The Australian Dollar (AUD) edges lower against the US Dollar (USD) on Friday. The downside risks for the AUD/USD pair seem possible as the US Dollar (USD) may receive support from the concerns about Donald Trump’s proposals to raise tariffs.

However, the AUD/USD pair appreciated more than 1% as the US Dollar (USD) faced challenges following the Federal Reserve's interest rate decision in the previous session. Additionally, the Aussie Dollar received support from China's trade balance, which was better than expected and released on Thursday.

The Federal Open Market Committee (FOMC) lowered its benchmark overnight borrowing rate by 25 basis points (bps) to a target range of 4.50%-4.75% at its November meeting on Thursday. Investors are now anticipating the release of the preliminary US Michigan Consumer Sentiment, which is expected later on Friday.

Federal Reserve Chair Jerome Powell indicated that the central bank is proceeding with interest rate cuts, given the ongoing tightness of monetary policy. Powell 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.

Daily Digest Market Movers: Australian Dollar depreciates amid Trump’s tariff threats

• US Initial Jobless Claims rose to 221,000 for the week ending November 1, according to a Thursday report from the US Department of Labor (DoL). This figure aligned with initial estimates and was up from the previous week’s revised total of 218,000 (originally reported as 216,000).
• China’s trade surplus expanded in October, reaching $95.27 billion year-over-year, surpassing the expected $75.1 billion and the previous $81.71 billion. Exports rose by 12.7% YoY, well above the anticipated 5.0% increase and the previous 2.4% growth. Meanwhile, annual imports fell by 2.3%, exceeding the expected 1.5% decline and contrasting with the previous 0.3% increase.
• Australia’s trade surplus fell to 4,609 million in September, down from an expected 5,300 million and August’s figure of 5,284 million, as reported by the Australian Bureau of Statistics on Thursday. Exports fell by 4.3% in September from the 0.2% decline seen a month earlier. Meanwhile, Imports fell by 3.1% MoM in September, compared to a decrease of 0.2% seen in August.
• The US ISM Services Purchasing Managers' Index increased to 56.0 in October, up from 54.9 in September, exceeding the forecast of 53.8. In contrast, the S&P Global Services PMI registered at 55.0 in October, slightly below the prior reading and the expected 55.3.
• The Reserve Bank of Australia (RBA) decided to hold the Official Cash Rate (OCR) steady at 4.35% on Tuesday, marking its eighth consecutive pause. RBA Governor Michele Bullock reiterated a hawkish stance, emphasizing the need for restrictive monetary policy given persistent inflation risks and a strong labor market.
• Australia's Judo Bank Services PMI improved to 51.0 in October from 50.6 in the previous reading, above the market consensus of 50.6. The Composite PMI climbed to 50.2 in October versus 49.8 prior. Caixin China Services PMI also rose to 52.0 in October from 50.3 in September.
• The TD-MI Inflation Gauge rose by 0.3% month-over-month in October, up from a 0.1% increase in the prior month, marking the highest reading since July and ahead of the RBA's November policy meeting. Annually, the gauge climbed by 3.0%, compared to the previous 2.6% reading.
• China’s Commerce Minister Wang Wentao met with Australia’s Trade Minister Don Farrell on Sunday. China expressed hopes that Australia will continue enhancing its business environment and ensure fair and equitable treatment for Chinese companies.

Technical Analysis: Australian Dollar trades above 0.6650, 14-day EMA

The AUD/USD pair trades near 0.6660 on Friday, showing a shift from bearish to bullish momentum on the daily chart. The pair has moved above the nine- and 14-day Exponential Moving Averages (EMAs), signaling short-term upward momentum. Furthermore, the 14-day Relative Strength Index (RSI) has crossed above the 50 mark, suggesting an ongoing bullish sentiment.

On the upside, the AUD/USD pair may explore the region around the psychological level of 0.6700.

Regarding the support, the AUD/USD pair may test the 14-day EMA of 0.6630, aligned with the nine-day EMA of 0.6624. A break below the latter could lead the pair to navigate the area around its three-month low at 0.6512, followed by key psychological support at 0.6500.

AUD/USD: Daily Chart