AUD/USD Price Forecast: Bulls retain control as weaker USD offsets US-China trade war concerns

The AUD/USD pair attracts buyers for the fourth successive day on Wednesday and climbs back closer to climbs back closer to a two-week high during the first half of the European session. Moreover, spot prices seem poised to build on the recent breakout momentum above the 100-day Simple Moving Average (SMA) amid a combination of supporting factors, despite rising US-China trade tensions.

The Australian Dollar (AUD) draws some support from the Reserve Bank of Australia's (RBA) relatively hawkish minutes on Tuesday, which emphasized that it was not yet possible to determine the timing of the next move in interest rates. Moreover, the Board emphasized that the next decision was not predetermined, though members agreed that the May meeting would offer a more “opportune time” for reassessment. Apart from this, the mostly upbeat Chinese macro data released earlier this Wednesday turns out to be another factor offering some support to the AUD/USD pair.

The National Bureau of Statistics (NBS) reported that China’s economy expanded at an annual rate of 5.4% in the first quarter (Q1) of 2025 compared to the forecast of 5.1%. On a quarterly basis, however, Chinese economic growth slowed from 1.6% to 1.2%, missing estimates for a 1.4% rise. Meanwhile, China’s annual March Retail Sales jumped by 5.9% vs. 4.2% expected and 4% prior, while Industrial Production came in at 7.7% vs. 5.6% anticipated and February’s 5.9%. Moreover, the Fixed Asset Investment advanced 4.2% year-to-date (YTD) in March vs 4.1% expected and previous.

Apart from this, the underlying bearish sentiment surrounding the US Dollar (USD) validates the near-term positive outlook for the AUD/USD pair. Investors now seem convinced that a tariffs-driven US economic slowdown will force the Federal Reserve (Fed) to resume its rate-cutting cycle soon. Moreover, traders are pricing in the possibility that the US central bank will lower borrowing costs by 100 basis points this year. Moreover, US President Donald Trump's rapidly shifting stance on trade tariffs keeps the USD depressed near its lowest level since April 2022 touched last week.

Trump took a U-turn last week and abruptly backed off his hefty reciprocal tariffs on most US trading partners for 90 days. Moreover, Trump suggested that he might grant exemptions on auto-related levies after removing smartphones, computers, and some other electronics from steep tariffs on China. Trump, however, said that exemptions were only temporary and promised to unveil tariffs on imported semiconductors over the next week. Trump also threatened that he would impose tariffs on pharmaceuticals in the near future and kept in place 145% duties on other Chinese imports.

Meanwhile, China increased its tariffs on US imports to 125% last Friday, intensifying the trade war between the world's two largest economies. This, in turn, is seen acting as a headwind for the China-proxy Aussie. Traders also seem reluctant to place aggressive bets and opt to wait for Fed Chair Jerome Powell's comments for cues about the future rate-cut path, which will drive the USD demand and influence the AUD/USD pair. In the meantime, traders will take cues from the US Retail Sales figures to grab short-term opportunities later during the early North American session.

AUD/USD daily chart

Technical Outlook

From a technical perspective, the overnight sustained move and close above the 100-day SMA could be seen as a key trigger for bullish traders. Moreover, oscillators on the daily chart have been gaining positive traction and suggest that the path of least resistance for the AUD/USD pair is to the upside. However, the recent repeated failures ahead of the 0.6400 round figure warrant some caution. Hence, it will be prudent to wait for some follow-through buying the said handle before placing fresh bullish bets. This is followed by the 50% Fibonacci retracement level of September 2024, around the 0.6420-0.6425 region, above which spot prices could accelerate the positive move towards the 200-day SMA, around the 0.6480 region, and reclaim the 0.6500 psychological mark.

On the flip side, any corrective pullback could be seen as a buying opportunity and is more likely to remain limited near the 100-day SMA, currently pegged around the 0.6300-0.6290 region. The next relevant support is seen near the 0.6240 area, below which the AUD/USD pair could weaken towards testing sub-0.6200 levels. The subsequent downfall would negate the near-term positive outlook and shift the bias in favor of bearish traders. This, in turn, would make spot prices vulnerable to fall further towards the 0.6125 intermediate support en route to the 0.6100 round figure.