Australian Dollar holds steady near 0.6400 despite renewed USD strength
- AUD/USD trades around the 0.6400 zone, holding gains despite US Dollar stabilization.
- Concerns about a China-linked slowdown keep the Aussie under pressure, despite upbeat Q1 Chinese GDP.
- Resistance emerges near 0.6420; short-term moving averages maintain bullish alignment.
The Australian Dollar (AUD) trades with a modestly bullish tone on Tuesday, consolidating near the 0.6400 region during North American trading hours. The pair has shown resilience despite a minor rebound in the US Dollar Index (DXY), which bounced slightly from a three-year low as markets adjust to profit-taking after Monday’s steep USD decline. EUR/USD and GBP/USD have also eased from recent highs, while AUD/USD clings to a narrow daily range between 0.6377 and 0.6439.
Investors remain cautious as the US-China trade dispute shows no signs of easing. Tensions escalated after the White House ordered a probe into potential tariffs on all mineral imports, prompting fears of supply chain disruptions. China responded with new export controls on key rare earth materials. Despite solid Q1 growth in China at 5.4% year-over-year and March’s strong industrial production and retail sales, the Aussie remains vulnerable due to its economic ties with Beijing. Meanwhile, the Reserve Bank of Australia is still expected to cut rates in May, further capping the upside.
Daily digest market movers: USD rebounds, trade tensions and Fed political jitters ask for caution
- US President Trump renewed pressure on Federal Reserve (Fed) Chair Powell, accusing him of dragging the economy and calling for immediate rate cuts.
- Fed independence concerns grow as markets digest reports of Trump exploring Powell’s dismissal before term completion.
- The International Monetary Fund (IMF) cut global growth forecasts to 2.8% in 2025 and 3.0% in 2026, citing century-high US tariffs and policy uncertainty.
- Richmond Fed Manufacturing Index slipped further to -13 in April, its weakest reading since November.
- Trump’s trade policies have increased headline inflation risk by up to one percentage point, according to IMF estimates.
- Investors remain wary as the Fed independence debate and tariff uncertainty threaten to undermine USD credibility in the longer term.
Technical analysis: AUD/USD retains bullish bias amid narrow range
The AUD/USD pair maintains a constructive technical outlook despite slipping slightly during the session. The price action is holding within the 0.6377 to 0.6439 daily range, with short-term indicators suggesting further upside potential if support zones hold. The Relative Strength Index (RSI) sits at 58.6700, indicating neutral momentum, while the Moving Average Convergence Divergence (MACD) continues to issue a buy signal, underlining sustained bullish momentum.
The Stochastic %K at 94.4800 and Commodity Channel Index (CCI) at 99.8800 both hover in neutral zones, not yet signaling exhaustion. Importantly, all short-term Simple Moving Averages (SMA)—including the 10-day at 0.6329, 20-day at 0.6266, and 100-day at 0.6286—as well as the 10-day Exponential Moving Average (EMA) at 0.6336, align to support upward movement. However, the 200-day SMA at 0.6474 represents a key medium-term resistance and may limit any aggressive bullish extension.
Immediate support is seen at 0.6336, followed by 0.6332 and 0.6329. On the upside, resistance is expected around 0.6413, then 0.6423, with stronger pressure awaiting near 0.6474. As long as the Aussie remains above the 0.6330 handle, short-term sentiment stays in favor of buyers.
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.
