AUD/USD Price Forecast: Dip-buyers could help limit losses amid hopes for US-China trade deal

The AUD/USD pair trades with a negative bias for the second successive day on Monday, though it lacks follow-through selling and remains confined in a familiar range held over the past week or so. The uncertainty surrounding US-China trade talks is seen undermining the Australian Dollar (AUD), which, along with a modest US Dollar (USD) uptick, acts as a headwind for the currency pair. The downside, however, remains cushioned amid the optimism over a potential de-escalation of trade tensions between the world's two largest economies.

China last week exempted some US imports from the 125% tariffs – imposed earlier this month in retaliation to US President Donald Trump's 145% duties on Chinese imports. Adding to this, Trump asserted in an interview published on Friday that tariff negotiations were underway with China. Furthermore, US Agriculture Secretary Brooke Rollins said on Sunday that the Trump administration is holding daily discussions with China regarding tariffs. This, in turn, fuels hopes that the prolonged US-China trade war might be drawing to a close.

China, however, has not yet communicated publicly on any exemptions and so far, denied that any tariff negotiations were taking place. In fact, a foreign ministry statement posted by the Chinese Embassy in the US stated that "China and the U.S. are NOT having any consultation or negotiation on #tariffs, and the US should stop creating confusion." Moreover, US Treasury Secretary Scott Bessent – a key player in U.S. trade talks – said on Sunday that he did not know whether the US President had spoken to Chinese counterpart Xi Jinping.

Meanwhile, conflicting signals add to the growing market uncertainty, infusing volatility in the global markets and weighing on the perceived riskier Aussie. This, in turn, assists the USD in preserving last week's recovery gains from a multi-year low. Moreover, investors seem convinced that the Reserve Bank of Australia (RBA) will deliver another 25-basis point (bps) rate cut in May amid deepening economic uncertainties and intensifying concerns over the global trade environment. This further contributes to the offered tone surrounding the AUD/USD pair.

The Federal Reserve (Fed), on the other hand, is expected to resume its rate-cutting cycle in June and lower borrowing costs by a full percentage point by the end of this year. This might cap the USD and support the AUD/USD pair. This warrants caution for bears ahead of this week's key macro data – Australian consumer inflation figures, official Chinese PMIs, and the Advance US Q1 GDP print on Wednesday. Apart from this, the US Nonfarm Payrolls (NFP) on Friday could provide more insight into the Fed's policy outlook and influence the USD.

AUD/USD daily chart

Technical Outlook

The range-bound price action witnessed over the past week or so might be categorized as a bullish consolidation phase against the backdrop of the AUD/USD pair's sharp recovery from the 0.5900 neighborhood, or a five-year low touched earlier this week. Moreover, the recent breakout above the 100-day Simple Moving Average (SMA) – for the first time since October 2024 – and positive oscillators on the daily chart suggest that the path of least resistance for spot prices is to the upside. That said, repeated failures to near the 50% Fibonacci retracement level of the September 2024-April 2025 downfall warrant some caution for bulls. The said barrier is pegged near the 0.6435-0.6440 region and should act as a key pivotal point for short-term traders.

A sustained strength beyond should allow the AUD/USD pair to surpass the 200-day SMA hurdle near the 0.6465-0.6470 zone and reclaim the 0.6500 psychological mark. The positive momentum could extend further towards the 61.8% Fibo. level, around the 0.6545 region, which if cleared decisively should pave the way for a further appreciating move. Spot prices might then climb to the 0.6600 round figure en route to the next relevant resistance near the 0.6650 area and the 0.6700 neighborhood, or the November 2024 swing high.

On the flip side, weakness below the 0.6350 immediate support, representing the lower boundary of the short-term trading band, could attract some dip-buyers near the 0.6300 mark (38.2% Fibo. level). This should help limit the downside for the AUD/USD pair near the 100-day SMA, currently around the 0.6280 region. A convincing break below the latter, however, might prompt some technical selling and drag spot prices to the 0.6220 intermediate support en route to sub-0.6200 levels. The next relevant support is pegged near the 0.6130 area, which if broken decisively might shift the near-term bias in favor of bearish traders.