Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.5885.
- Add a stop-loss at 0.6050.
- Timeline: 1-2 days.
Bullish view
- Buy the AUD/USD pair and a take profit at 0.6050.
- Add a stop-loss at 0.5885.
The AUD/USD continued its downtrend and reached its lowest level since March 2020 as concerns about the Australian and Chinese economies continued. The pair crashed to a low of 0.5930, down by about 14% from last year's highest point.
Australia and US trade war
The AUD/USD exchange rate continued its downtrend as concerns about the Australian economy continued. That is after Donald Trump announced a 10% tariff on most of its imports. Some of the goods from Australia, like steel and aluminum, will be charged a 25% tariff. Trump has complained that Australia does not accept US beef, even as the US buys meat worth billions each year.
Analysts believe that the Australian economy would be impacted by these tariffs although the country may avoid a recession.
The AUD/USD pair also dropped as the trade war between China and Australia continued. Trump announced that he would impose a 50% tariff on Chinese imports if Beijing goes on with its 34% tariffs. China is Australia’s biggest trading partner, buying most of its goods like coal and iron ore.
On the positive side, there are signs that Trump may decide to negotiate with other countries now that the US stock market has crashed and his approval ratings have dropped. He has already confirmed that Japanese trade negotiators would be visiting the US soon for talks.
The upcoming US inflation data and Federal Reserve minutes will be the next key catalysts for the AUD/USD pair. The minutes will come first and provide more information about the last meeting and what officials deliberated. Still, a lot has changed since the Fed officials met last month.
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The same is true with the upcoming US inflation data. While analysts expect inflation to move downwards in March, the expectation is that Trump’s tariffs will lead to higher inflation in the long term.
AUD/USD technical analysis
The AUD/USD pair retreated to a low of 0.5930, its lowest level since 2020. On the weekly chart, the pair moved below the key support level at 0.6165, its lowest point in 2022 and the lower side of the descending triangle pattern.
The pair has moved below the 50-week moving average, a sign that bears are in control. Also, the Relative Strength Index (RSI) and the MACD indicators have pointed downwards. Therefore, the pair will likely keep falling as sellers target the next key support at 0.5900. A move above the resistance at 0.6100 will invalidate the bearish view.
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