- Trump renews tariff threats on Mexico, Canada, and China.
- Federal Reserve holds rates steady, maintaining a cautious stance on inflation risks.
- AUD/USD trades near 0.6215, pressured by RBA rate cut expectations and China's economic slowdown.
The AUD/USD pair trades modestly higher at 0.6215 during the Asian session on Friday but remains under pressure due to tariff threats from US President Trump. Market participants are still anticipating 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 his plans to impose tariffs on Mexico, Canada, and China, which is fueling safe-haven demand for the US Dollar. He also threatened to impose 100% tariffs on BRICS nations if they attempt to replace the US Dollar with a new currency in international trade.
On the US economic data front, the Core Personal Consumption Expenditures (PCE) Price Index rose by 0.2% month-on-month, in line with expectations, while the annual core PCE remained unchanged at 2.8%. Fed officials, including Governor Michelle Bowman, warned about lingering inflation risks, reinforcing expectations that rate cuts could be delayed.
In Australia, Q4 inflation data came in lower than expected, with the trimmed mean CPI easing to 3.2% from the RBA's prior forecast of 3.4%. Traders are now fully pricing in a 25-basis-point rate cut at the upcoming February meeting.
Technical Overview
AUD/USD remains range-bound with limited directional momentum. The Relative Strength Index (RSI) sits at 47, still in negative territory but showing signs of recovery. The MACD histogram indicates weakening bullish momentum.
Immediate resistance is at 0.6230, near the 20-day Simple Moving Average (SMA). On the downside, key support is at 0.6200, with a break lower potentially leading to further declines towards 0.6170. Without a decisive move, the pair is likely to consolidate within its current range.
