Australian Dollar extends slump toward 0.6000 as tariff anxiety deepens in Monday trade
- AUD/USD continues to sink in Monday’s US session, trading near the 0.6000 region after earlier stalling a brief Asian recovery.
- US-China trade standoff intensifies with more tariffs; Trump mulls 90-day pause for others, Australia still at risk.
- Bearish momentum persists with oversold signals building; resistance seen near 0.6100, while the pair holds mid-range.
The AUD/USD pair remains under sustained pressure during Monday’s American session, holding near the 0.6000 zone after a short-lived rebound in Asia. The pair has extended its decline from Friday’s deep losses as risk sentiment remains sour amid continued tariff escalation between the United States and China.
US President Donald Trump’s aggressive stance highlighted by a new executive order imposing a 34% levy on Chinese imports has sparked fears of a broader trade war. Meanwhile, hopes for a tariff reprieve were dashed after the White House denied reports of a 90-day pause, leading markets back into risk-off mode.
From a technical standpoint, the pair remains deeply bearish with the Relative Strength Index (RSI) in oversold territory and the Moving Average Convergence Divergence (MACD) confirming renewed downward pressure.
Daily digest market movers: Tariff rhetoric keeps Aussie pinned
- Tensions between the US and China escalated after President Trump’s latest trade decree prompted Beijing to retaliate with 34% tariffs. Despite early reports hinting at a 90-day pause in broader tariffs, the White House firmly refuted the claim, calling it misinformation.
- Equities initially trimmed losses on speculation of a softer stance but quickly reversed after official denials. Wall Street fell sharply again with the Dow Jones shedding more than 1.5% and the S&P 500 and Nasdaq tracking similar losses before recovering.
- The Australian Dollar remains heavily exposed to Chinese trade dynamics, and due to tariff threats mounting, market participants are increasingly pricing in aggressive easing by the Reserve Bank of Australia.
- China’s Foreign Ministry rejected the US approach, labeling it coercive and unconstructive, as the trade dispute shows no signs of resolution. Trump’s insistence on solving the trade imbalance before any deal adds further uncertainty.
- The AUD’s failure to build on earlier gains reflects waning confidence in global growth prospects with commodities and risk currencies falling in tandem.
Technical analysis
The technical backdrop for AUD/USD remains decisively bearish on Monday. Price action is hovering near the middle of the day’s range, having bounced slightly off earlier lows. Still, bearish momentum remains entrenched with the MACD printing a fresh red bar and maintaining a clear sell signal. The RSI sits at 25, deep within oversold territory, albeit with a slightly softer decline compared to Friday.
Despite the downward pressure, some mixed signals have emerged. The Commodity Channel Index (CCI), surprisingly, points to a possible oversold bounce, while the Bull/Bear Power remains flat, hinting at temporary consolidation.
The broader trend remains negative, confirmed by a clean sweep of selling signals across major moving averages. The 10-day EMA, alongside the 20-day, 100-day and 200-day Simple Moving Averages (SMAs), are all aligned lower, reinforcing the dominant downtrend.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Author
Patricio Martín
FXStreet
Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.
