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AUD/USD Price Forecast: Tariffs continue to weigh on AUD

  • AUD/USD regained composure after a drop to the vicinity of 0.5900.
  • The US Dollar dropped markedly on the back of jitters around the US economy.
  • Chinese 84% levies on US goods will kick in on April 10.

The Australian Dollar (AUD) managed a decent comeback on Wednesday after taking a hefty hit over the past three days.

In fact, AUD/USD regained the psychological 0.6000 mark and beyond, recovering from earlier new multi-year lows near the 0.5900 support, its weakest level since March 2020.

This rebound came primarily on the back of a much weaker US Dollar (USD) on the back of mounting concerns over the economic impact of President Trump’s tarde policies.

Global trade tensions heat up

In a dramatic move, President Trump introduced tariffs ranging from 10% to 50%, triggering swift countermeasures and ratcheting up fears of a global trade war. Such an escalation could weigh on global growth, boost consumer prices, and complicate monetary policies worldwide.

Australia, given its strong economic ties with China—especially in commodities—finds its currency directly exposed to any slowdown in Chinese demand or collateral damage from US-imposed tariffs. Markets got a stark reminder of that last week when China countered with its own tariffs, sending AUD/USD to multi-year lows. 

Doubling down on the showdown, Trump’s 104% tariffs on China kicked in today, while China’s 84% retaliatory tariffs on US goods are due on Thursday, all motivating the trade effervescence to swell.

Fed treads carefully

Stateside, the Federal Reserve (Fed) finds itself caught between rising trade strains, which could drive inflation higher, and signs of a moderating US economy. In March, the Fed held its benchmark rate at 4.25–4.50%, opting to watch and wait.

Last Friday, Fed Chair Jerome Powell conceded that new tariffs may have a bigger impact on inflation and growth than anticipated. Going forward, the Fed’s actions will likely be dictated by ongoing trade developments.

RBA stands pat amid uncertainty

Meanwhile, the Reserve Bank of Australia (RBA) left its Official Cash Rate (OCR) unchanged at 4.10% on Tuesday, as widely predicted. Policymakers scrapped earlier hints of additional easing, highlighting risks on both the upside and downside of the economic spectrum.

RBA Governor Michele Bullock underscored the challenge of bringing inflation back to the 2–3% band and confirmed a unanimous vote to keep policy on hold. The market responded by lowering the odds of a 25-basis-point rate cut at the May 20 meeting from 80% to 70%.

Bearish sentiment swirls around the Aussie

Traders remain wary of the Australian Dollar. The latest CFTC data shows net shorts hovering near multi-month highs at around 76K contracts, reflecting persistent tariff concerns and ongoing caution toward the Aussie.

AUD/USD technical landscape

From a technical standpoint, as long as the pair stays below its 200-day Simple Moving Average (SMA) near 0.6490, the bias remains tilted to the downside. Renewed selling pressure could drive the pair back toward its recent 2025 trough at 0.5913 (April 8), and even challenge the 2020 bottom at 0.5506 (March 19). 

On the flip side, a break above the 2025 high at 0.6408 (February 21) could open the door for a test of the 200-day SMA at 0.6489, and potentially the November 2024 top at 0.6687.

While the Relative Strength Index (RSI) bouncing toward the 33 level, the Average Directional Index (ADX) near 18 suggests the overall trend is still quite soft, despite a slight rebound.

 AUD/USD daily chart

The road ahead

The Melbourne Institute’s Inflation Expectations will be published on April 10.

Bottom line 

The fate of the Australian Dollar hinges on how intensifying trade conflicts play out, the health of China’s economy, and shifting monetary policies in both Australia and the US. With stakes rising, the Aussie will be quick to respond to any trade news or policy surprises in the weeks ahead.

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Author

Pablo Piovano

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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