-
The Australian Dollar rose after Trump exempted key technology products, including some from China, from his new "reciprocal" tariffs.
-
RBA Meeting Minutes revealed uncertainty regarding the timing of the next interest rate move.
-
The US Dollar is attempting to stabilize as investors weigh growing concerns over stagflation.
The Australian Dollar (AUD) extends its rally for the fifth consecutive session against the US Dollar (USD), trading around 0.6340 during Tuesday’s Asian session. The upward momentum in the AUD/USD pair is largely supported by improving global risk sentiment after US President Donald Trump announced exemptions for several key technology products—including smartphones, computers, and semiconductors—from the newly imposed “reciprocal” tariffs.
These exemptions, which mostly benefit Chinese-manufactured goods, have boosted confidence in global trade and supported the Australian Dollar, given Australia’s close trade ties with China and heavy commodity exports. China is Australia’s largest trading partner, and signs of easing trade tensions tend to favor the Aussie.
Minutes from the Reserve Bank of Australia's (RBA) April policy meeting showed that while interest rates were left unchanged, uncertainty remains around the timing of the next move. The RBA emphasized that no decision had been made, though the May meeting was noted as a potential point to reassess monetary policy. The central bank acknowledged risks from global trade tensions and pointed to both upside and downside risks for the domestic economy and inflation outlook.
Australia’s 10-year bond yield declined to around 4.33%. Despite holding rates steady, the RBA hinted at a dovish stance due to cooling core inflation. Markets are now pricing in a 25-basis point rate cut in May, with around 120 basis points of total easing projected for 2025.
AUD Benefits from Weakening US Dollar Amid Stagflation Concerns
- The US Dollar Index (DXY) is attempting to stabilize near 99.90 after hitting its lowest level since 2022. Investor confidence in the greenback has been shaken amid rising concerns about stagflation—marked by sluggish growth and stubborn inflation.
- Recent US economic data paint a mixed picture. The University of Michigan's consumer sentiment index fell to 50.8 in April, and one-year inflation expectations surged to 6.7%. March's Producer Price Index (PPI) rose 2.7% YoY, slightly easing from 3.2% in February. Meanwhile, core PPI slipped to 3.3%. Initial jobless claims rose to 223,000, but continuing claims dropped to 1.85 million, highlighting ongoing labor market resilience.
- Several Federal Reserve officials have signaled caution. Atlanta Fed President Raphael Bostic noted the long road ahead to reach the Fed’s 2% inflation target, while Minneapolis Fed President Neel Kashkari emphasized that trade uncertainty, driven by Trump’s tariff policies, presents a major confidence shock—comparable only to the early days of the COVID-19 pandemic.
- Trade tensions continue to simmer after China sharply raised tariffs on US goods, retaliating against Trump’s decision to hike tariffs on Chinese imports to 145%. China’s Ministry of Finance increased tariffs to 125%, reigniting fears of a global slowdown.
- Despite the geopolitical friction, China’s March trade surplus surged, reaching CNY 736.72 billion, or $102.6 billion in USD terms. Exports jumped 13.5% YoY, while imports fell 3.5%. The General Administration of Customs of China acknowledged the tough external environment but remained optimistic, pledging firm action to protect national interests.
- To support its economy amid these challenges, the People’s Bank of China (PBoC) is expected to implement further monetary easing in Q2 2025, including a potential 15 basis point cut to the loan prime rate (LPR) and a 25 basis point reduction in the reserve requirement ratio (RRR), as forecasted by Citi analysts.
AUD/USD Technical Outlook: Bullish Momentum Intact
From a technical perspective, the AUD/USD pair remains supported by bullish indicators. It is trading above both the nine-day and 50-day Exponential Moving Averages (EMAs), with the 14-day Relative Strength Index (RSI) climbing above the 50 mark—signaling sustained buying interest.
On the upside, the pair could test psychological resistance at 0.6400, with the next major hurdle at the four-month high of 0.6408.
Immediate support is found at the 50-day EMA around 0.6270, followed by the nine-day EMA near 0.6240. A break below these levels would weaken the bullish setup and expose downside risk toward 0.5914—the lowest level since March 2020—and the key 0.5900 psychological area.
The Australian Dollar looks poised to maintain its upward trajectory as long as global risk sentiment stays positive and US Dollar weakness persists.
AUD/USD: Daily Chart
