The Australian Dollar continues to show weakness against the US Dollar, maintaining its subdued position for the fourth consecutive day. Recent data reveals that Australia’s monthly Consumer Price Index (CPI) rose by 2.5% year-over-year in January, slightly below the anticipated growth of 2.6%. This stagnation in the AUD/USD pair reflects broader economic concerns.
Market sentiment is further complicated by rising geopolitical tensions, particularly in the United States. The announcement that the Trump administration plans to move forward with previously delayed tariffs on imports from Canada and Mexico has heightened investor apprehension. These tariffs are part of a broader strategy to impose reciprocal tariffs, reflecting ongoing frustrations about international trade dealings.
Compounding these uncertainties, the Trump administration is also reportedly tightening chip export regulations directed at China, a critical trading partner for Australia. Reports indicate that the US is contemplating stricter export controls on significant semiconductor manufacturers, which could have repercussions on Australia’s economy given its reliance on Chinese trade.
On the monetary policy front, the People’s Bank of China has intervened by injecting liquidity into the market, which may bolster ongoing economic interactions between the two nations. As liquidity measures are enacted, fluctuations in the Chinese economy could further affect the Australian Dollar.
The US Dollar Index, which monitors the dollar against key currencies, has recently dipped to around 106.00 as yields on US Treasury bonds have also decreased. Meanwhile, the economic landscape in the US remains mixed, with recent data showing a decline in the Composite PMI, while manufacturing indicators present a more optimistic picture.
In Australia, the Reserve Bank recently lowered its Official Cash Rate for the first time in four years to 4.10%, reflecting concerns about high interest rates. However, the RBA has cautioned that it is premature to claim victory over inflation, and future rate cuts remain uncertain.
Currently trading near 0.6340, the AUD/USD pair has breached an ascending channel, signaling potential shifts in market sentiment. Immediate resistance is observed at the nine-day Exponential Moving Average around 0.6342, while a notable decline beneath the 14-day EMA of 0.6331 could pave the way for a further bearish trend, targeting the psychological level of 0.6300.
