- The AUD/USD outlook suggests weak risk appetite.
- Trump has assumed an aggressive approach to tariffs, threatening the US economy.
- Market participants will focus on US inflation data for more clues on Fed rate cuts.
The AUD/USD outlook suggests weak risk appetite as Trump’s tariffs drive fears of a US recession. Consequently, the risk-sensitive Australian dollar fell as traders preferred safer currencies like the yen.
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Initially, the Australian dollar rallied against the dollar after a downbeat US employment data. Friday’s jobs report increased expectations of Fed rate cuts this year. Moreover, it briefly shifted the market focus from Trump’s tariffs.
However, as the new week started, jitters about a US recession due to trade wars returned. Trump has assumed an aggressive approach to tariffs, threatening the US and other major economies like Canada and China. Last week, the US president added tariffs to China, dimming the outlook for the economy. As a result, the yuan collapsed, pulling the Australian dollar as well. The trade war between China and the US will keep weighing on the Aussie, a proxy for the yuan.
This week, market participants will focus on US inflation data for more clues on Fed rate cuts. Economists expect a slight easing, with the monthly figure easing from 0.5% to 0.3%. Meanwhile, the annual figure might come in softer at 2.9%. Softer-than-expected figures will solidify expectations for rate cuts this year, further weighing on the dollar. On the other hand, an upbeat report might ease pressure on the Fed to lower borrowing costs.
AUD/USD key events today
AUD/USD technical outlook: Bears eye the 0.6200 support level
On the technical side, the AUD/USD price has broken below the 30-SMA, indicating a bearish shift in sentiment. At the same time, the RSI has broken below 50, indicating stronger bearish momentum.
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Initially, bulls had taken charge when the price paused at the 0.6200 support level. The RSI showed that bears were weak as it made a bullish divergence. However, they failed to break past the 0.6350 resistance level after the takeover. However, bulls have time to resume the rally by breaking above 0.6350 to make a higher high.
On the other hand, if bears remain in the lead, the price will soon reach the 0.6200 support level. A break below this level will confirm a downtrend as it would make a lower low.
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