The Australian Dollar (AUD) is facing challenges as the US Dollar (USD) gains ground due to Trump’s tariff threats. These threats have created a headwind for risk-sensitive currencies like the AUD.
Impact of Trump Tariff Threats on the AUD/USD
How Tariffs Influence the Currency Pair
The tariff threats from Trump’s administration have boosted the US Dollar across the board and put pressure on the AUD/USD pair. Speculations about a potential 10% tariff on Chinese goods might further drag the AUD lower since China is Australia’s largest trading partner.
Domestic and International Data Affecting the AUD
Employment Data and Trade Balances
The AUD did receive some support after the release of domestic mixed employment data on Thursday. The seasonally adjusted Employment Change rose by 35,600, bringing the total number of employed people to 14,535,500 in November. Meanwhile, the Unemployment Rate dropped to 3.9%, the lowest since March and lower than market estimates of 4.2%.
On the international front, China, a key trading partner of Australia, saw its top leaders and policymakers consider letting the Chinese Yuan fall in response to an expected sharp hike in US tariffs, as reported by Reuters. China’s Trade Balance (CNY) increased to CNY 692.8 billion in November, up from CNY 679.1 billion in the previous month. Exports grew by 1.5% year-over-year in November compared to the 11.2% rise in October. Meanwhile, imports increased by 1.2% YoY, recovering from the 3.7% decline recorded earlier.
Economic Indicators and Policy Decisions
US and Australian Data and Central Bank Actions
The US Dollar appreciated due to the hotter-than-expected US Producer Price Index (PPI) report released on Thursday. The US PPI jumped 0.4% MoM in November, the largest gain since June, after an upwardly revised 0.3% increase in October. This reading was better than the 0.2% expected.
The US Federal Reserve (Fed) interest rate decision will be in the spotlight next week. Traders are now fully pricing in a 25 basis point rate cut on December 18, according to the CME FedWatch Tool.
In Australia, the RBA kept the Official Cash Rate (OCR) unchanged at 4.35% in its final policy meeting in December. RBA Governor Michele Bullock highlighted that while upside inflation risks have eased, they persist and require ongoing vigilance. The RBA will closely monitor all economic data, including employment figures, to guide future policy decisions.
Australia’s economy grew at its slowest annual pace since the pandemic in the third quarter. The OZ nation’s Gross Domestic Product (GDP) rose 0.3% in the September quarter, missing market forecasts of 0.4%.
Technical Analysis of the AUD/USD Pair
Key Levels and Trends
The AUD/USD pair hovers near 0.6360 on Friday. The daily chart analysis suggests a strengthening bearish bias as the pair moves downwards within a descending channel pattern. The 14-day Relative Strength Index (RSI) also remains slightly above the 30 level, indicating sustained bearish momentum.
The yearly low of 0.6348, last seen on August 5, serves as immediate support. A successful break below this level could strengthen the bearish bias and lead the AUD/USD pair toward the descending channel’s lower boundary around the 0.6190 level.
On the upside, the AUD/USD pair may find initial resistance around the nine-day Exponential Moving Average (EMA) at 0.6404. The next barrier appears at the 14-day EMA at 0.6427, which is aligned with the upper boundary of the descending channel. A decisive breakout above this channel could drive the pair toward the seven-week high of 0.6687.
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