AUD/CAD under pressure as trade war escalates

Market overview

The Australian dollar (AUD) remains under selling pressure against the Canadian dollar (CAD) as geopolitical risks and trade tensions escalate. The US temporarily suspended tariffs on Canadian and Mexican imports for 30 days, easing concerns over North American trade disruptions. However, a 10% tariff hike on Chinese imports came into effect on Tuesday, fueling market volatility and dampening risk appetite.

China responded with retaliatory tariffs on US imports, announcing 15% duties on coal and liquefied natural gas (LNG) from the US, alongside 10% additional tariffs on crude oil, agricultural equipment, and automobiles. This deterioration in global trade relations has weakened commodity-linked currencies, particularly the Australian dollar, as China remains its largest trading partner. Meanwhile, the Canadian dollar is relatively stable, benefiting from moderate oil price gains and Canada’s exemption from immediate US tariffs.

Technical analysis

On the daily chart, AUD/CAD is trading near its lowest level in over a week, following a rejection from the four-month descending trendline. Sellers have pushed the pair toward key support at 0.89655, where buyers are attempting to defend the level.

A decisive breakdown below this support zone would strengthen the bearish bias, exposing the next downside targets at 0.89328, 0.88912, and 0.88452.

RSI is trending below 50, indicating increasing bearish momentum. MACD histogram is shrinking toward zero, suggesting that buying pressure is fading while sellers remain in control. Moving averages confirm a mixed trend, with the short-term moving averages reinforcing downside risk, while longer-term averages signal potential consolidation.

However, if buyers successfully defend the 0.89655 support, an upside recovery toward 0.90115 and 0.90858 remains possible. A confirmed breakout above 0.90858 would invalidate the bearish outlook, paving the way for a shift in sentiment toward higher levels.

Key technical levels

• Resistance levels: 0.90115, 0.90858.

• Support levels: 0.89655, 0.89328, 0.88912, 0.88452.

Fundamental factors driving AUD/CAD

Upcoming key economic events

• Canada’s Trade Balance (Wednesday) – Expected to impact the CAD’s performance, particularly amid ongoing US trade policy uncertainty.

• Australia’s Trade Balance (Thursday) – A weaker-than-expected report could exert further downside pressure on AUD.

• China & Canada’s PMI Data – Investors will closely watch economic sentiment indicators for potential shifts in risk appetite.

• Canada’s Employment Report – Job market strength will be key in determining the Bank of Canada’s future rate policy stance.

Conclusion

AUD/CAD remains bearish, with technical indicators reinforcing selling momentum. A break below 0.89655 could accelerate losses, while a rebound above 0.90858 is required to negate downside risks.