The Australian Dollar (AUD) is under continued pressure for the second consecutive session on Monday, with the AUD/USD pair weakening as the US Dollar (USD) strengthens. The decline in the Australian currency comes amid renewed concerns over economic uncertainties and global trade dynamics.
A recent development that impacted market sentiment was China’s decision on Friday to exempt certain US imports from its 125% tariffs. This move sparked optimism that the ongoing trade war between the US and China might be nearing a resolution. However, a Chinese embassy spokesperson swiftly denied any ongoing negotiations with the US, urging Washington to “stop creating confusion” and clarifying that there are no current consultations on tariffs.
The Australian Dollar also faces additional headwinds due to expectations that the Reserve Bank of Australia (RBA) may cut interest rates by 25 basis points at its May meeting. Economic uncertainties in Australia and concerns over global trade tensions have fueled speculation of further monetary easing.
US Dollar Gains as Trade Tensions Ease Slightly, Markets Await Fed‘s Next Move
The US Dollar Index (DXY), which measures the USD against six major currencies, has strengthened for the second day in a row, trading near 99.60. This comes as trade-related concerns between the US and China show signs of easing. US Agriculture Secretary Brooke Rollins confirmed that daily discussions between the US and China are continuing on tariffs, with reports suggesting that exclusion lists for certain US imports are in the works, though no formal policy changes have been announced.
In the US, data showed a slight uptick in initial jobless claims, with 222,000 applications for unemployment benefits for the week ending April 19, higher than expected. However, continuing jobless claims fell, indicating some resilience in the labor market. The US Treasury Secretary acknowledged that current tariffs on Chinese goods are unsustainable and need to be reduced to allow meaningful trade talks to resume.
Expectations for RBA Rate Cut Weigh on Australian Dollar
Westpac analysts forecast that the RBA will lower its cash rate by 25 basis points at its upcoming meeting on May 20, further putting downward pressure on the Australian Dollar. The RBA’s data-driven approach to rate decisions adds uncertainty, making it difficult to predict the central bank‘s next move with confidence.
Meanwhile, in a broader global context, China’s Finance Ministry warned on Friday that the global economic growth remains weak, exacerbated by ongoing trade tensions. The ministry called for enhanced multilateral cooperation to stabilize the global economy.
Technical Outlook for AUD/USD: Bearish Bias Amid Trade and Rate Cut Concerns
The AUD/USD pair is trading around 0.6390 on Monday, with a bullish short-term bias on the daily chart. The pair is holding above the nine-day Exponential Moving Average (EMA), and the Relative Strength Index (RSI) remains above 50, indicating potential upward momentum. However, immediate resistance is seen near the four-month high of 0.6439, with further upside potential toward the five-month high at 0.6515 if that level is broken.
On the downside, the pair’s initial support is at the nine-day EMA, which sits at 0.6367, followed by stronger support at the 50-day EMA near 0.6305. A sustained drop below these levels could weaken the bullish outlook, with a potential move toward the March 2020 low of 0.5914.
As global trade uncertainties continue to influence markets and the RBA prepares for a potential rate cut, the Australian Dollar faces a challenging road ahead.
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