AUD/USD slides near 0.6200 after US PCE data, tariffs
- The Aussie extends its losing streak by about 0.54%, slipping near 0.6200 and approaching multi-week lows.
- A six-day decline sees the pair break below the 20-day Simple Moving Average, reinforcing short-term seller strength.
- Traders assess fresh tariff escalations, with President Trump threatening an extra 10% levy on Chinese imports.
- PCE data from the US from January met expectations.
The AUD/USD pair posts a fresh three-week low near 0.6200 in Friday’s trading session after extending its losing streak for the sixth straight day. The Aussie was already under downward pressure throughout the week but faced an extra blow following United States (US) President Donald Trump’s proposal of additional 10% tariffs on China on Thursday. Inflation data from the US also took center stage with the Personal Consumption Expenditures (PCE) data from January meeting expectations as well as Trump’s meeting with the Ukrainian president.
Daily digest market movers: Risk aversion grips Aussie amid trade tension and weak domestic indicators
- President Trump’s new 10% tariff threat on Chinese goods compounds existing duties, fueling fears of further retaliation. Tariffs for Mexico and Canadian goods are set to take place as soon as next week.
- Australian Private Capital Expenditure data unexpectedly shrank by 0.2% quarter-on-quarter in Q4 2024, missing a 0.8% forecast, highlighting weaker investment activity and undermining confidence in the Australian economy.
- Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser reiterates optimism for inflation improvements but stresses caution amid persistently tight labor-market conditions and uncertain price trends.
- Across the Pacific, the US Core Personal Consumption Expenditures Price Index, considered the Federal Reserve’s (Fed) key inflation measure, rose by 0.3% in January (month-over-month), matching expectations, as Fed policymakers weigh the implications of ongoing trade disputes.
- Ukrainian President Volodymyr Zelenskyy rejected President Trump’s “rare earth deal,” triggering an irate response from Trump and Vice President JD Vance, according to White House sources.
- The scuttled agreement intended to swap defense guarantees for mineral access was deemed ambiguous and insufficient to deter Russia’s invasion. Zelenskyy cited a more favorable proposal from the European Union, further dampening sentiment around the White House.
AUD/USD technical outlook: Sellers push below 20-day SMA as RSI heads toward negative zone
The AUD/USD pair fell by around 0.54% to trade near 0.6200 on Friday, extending a six-day losing streak and losing support from its 20-day Simple Moving Average. The Relative Strength Index (RSI) hovers in the lower part of the scale, suggesting waning bullish momentum, while the Moving Average Convergence Divergence (MACD) histogram shows decreasing green bars, reflecting diminishing upside pressure. Immediate support could emerge around the 0.6150 zone, whereas a bounce would likely face resistance near the 20-day SMA if risk sentiment improves or tariff anxieties recede.
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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