The AUD/USD currency pair remains under intense downward pressure, breaking through major support levels and reaching its lowest price since March 2020. At a low of 0.5930, the pair has now depreciated by over 14% from last year’s peak, underlining both macroeconomic and geopolitical pressures. This article features a well-researched overview of the topic by Monovex‘s team.
The recent moves suggest that the descending triangle pattern forming on higher timeframes could result in further declines, especially as markets digest the impact of trade wars, central bank policies, and economic data releases.
Australian and US Trade Tensions Resurface
The most immediate driver behind the sharp fall in AUD/USD is the reemergence of trade hostilities between Australia and the United States. The US President’s announcement of a 10% tariff on most imports from Australia has rattled markets. More crucially, some Australian exports, such as steel and aluminum, will now face 25% tariffs, increasing the cost burden on U.S. importers and disrupting Australian supply chains.
The US President’s criticism of Australia’s non-acceptance of US beef imports, while the U.S. remains a top consumer of Australian meat, added fuel to the fire. Although Australia is unlikely to plunge into recession from these tariffs alone, analysts agree that its export-driven economy is at significant risk, especially given the current global demand slowdown.
Chinese-Australian Trade War Adds to Pressure
Adding to the downside is the ongoing trade dispute between Australia and China, Australia’s largest trading partner. The US President’s renewed commitment to a 50% tariff on Chinese goods–in response to Beijing’s 34% retaliatory tariffs–has injected volatility into global markets and raised concerns about collateral damage to third-party economies.
Australia, which exports the majority of its coal, iron ore, and agricultural products to China, could face secondary effects as Chinese demand contracts further. As a result, the Australian dollar, seen as a proxy for China-sensitive commodities, continues to struggle.
Risk Sentiment and Potential Negotiations
There is a faint glimmer of optimism in the form of potential trade negotiations, with the US President hinting at the resumption of talks. His confirmation that Japanese trade officials will soon visit the U.S. for discussions suggests that diplomatic backchannels remain active, possibly opening the door for broader negotiations involving Australia.
However, this optimism has yet to translate into any significant rebound in AUD/USD, particularly as the U.S. equity market has entered correction territory and the US President’s approval ratings have dropped. Market participants remain cautious, waiting for concrete policy changes before reversing their bearish positioning.
Key Catalysts: US Inflation and Fed Minutes
The next major catalysts for AUD/USD are scheduled this week, with the release of U.S. inflation data and the Federal Reserve meeting minutes. The FOMC minutes will be closely scrutinized for any hints of a shift in monetary policy stance, although the context has shifted considerably since the last meeting.
As for inflation, analysts are expecting core and headline CPI to moderate in March, a move that would strengthen the USD in the short term. However, in the medium-to-long term, the introduction of broad-based tariffs is likely to stoke inflation, prompting a hawkish response from the Fed. This prospect further diminishes the appeal of the AUD relative to the USD.
Technical Analysis: Descending Triangle Breakdown
From a technical perspective, the recent breakdown in AUD/USD paints a distinctly bearish picture. On the weekly chart, the pair has now moved decisively below the 0.6165 support zone, which also marks the lower boundary of a descending triangle pattern that has been forming since mid-2022.
This breakdown is significant for several reasons:
- The price is now below the 50-week moving average, confirming that the long-term trend remains bearish.
- The Relative Strength Index (RSI) is well below 40 and pointing lower, indicating increasing downside momentum.
- The MACD (Moving Average Convergence Divergence) is deep in negative territory and continues to diverge lower, reinforcing the bearish momentum.
The next key support level lies at 0.5900, and a successful break below this psychological level could open the path toward 0.5800, a level not seen since early 2009.
Conversely, a bounce above 0.6100, which served as previous support and is now resistance, would invalidate the bearish thesis, at least temporarily. However, this scenario appears unlikely without a material shift in sentiment or policy.
Conclusion: Bearish Outlook Persists
The AUD/USD pair is trapped in a multi-layered web of fundamental weakness and technical breakdowns. With mounting pressure from trade disputes, weaker commodity demand, and a strong U.S. dollar, the Aussie’s prospects remain dim.
Unless diplomatic efforts or macroeconomic surprises shift the current trajectory, the descending triangle pattern continues to favor further downside. Traders should closely monitor the 0.5900 level as the next critical support. A breach of this level may confirm the start of a longer-term bearish leg.
COMTEX_465025435/2922/2025-04-29T03:38:21
