Australian Dollar Rises as Trump Hints at U.S.-China Trade Deal, Market Awaits Fed Signals

Australian Dollar Strengthens Despite Trade War Fears

The Australian Dollar (AUD) is gaining traction against the U.S. Dollar (USD) following remarks from U.S. President Donald Trump, hinting at the possibility of a new trade agreement with China. However, concerns remain high as Trump reaffirmed plans for 25% tariffs on automobiles, semiconductors, and pharmaceuticals.

While risk sentiment remains shaky due to global trade uncertainties, the Reserve Bank of Australia’s (RBA) recent rate cut to 4.10% has fueled further speculation about Australia’s economic outlook.

Australia’s Employment Data & RBA Outlook

The Australian Bureau of Statistics (ABS) reported that Australia’s Unemployment Rate ticked up to 4.1% in January, in line with market expectations. Meanwhile, employment growth showed resilience, adding 44K jobs—more than twice the expected 20K.

Despite the RBA’s rate cut, Deputy Governor Andrew Hauser noted that monetary policy remains restrictive, emphasizing that inflation remains the central bank’s key concern. With three to four rate cuts expected in 2025, investors remain cautious about the RBA’s future policy stance.

Trump’s Tariff Plans & U.S. Federal Reserve’s Hawkish Stance

Trump’s new tariff policies have heightened market volatility, adding pressure to global financial markets. While Trump confirmed potential trade talks with China, he also reaffirmed 25% tariffs on critical imports, escalating trade tensions.

The U.S. Federal Reserve’s latest meeting minutes reflected a cautious approach to interest rate cuts. The Fed reiterated that inflation must decline further before any adjustments to monetary policy. Market analysts expect the Fed to hold rates steady in the short term.

Market Impact on AUD/USD

The Australian Dollar faced downward pressure after the RBA’s first rate cut in four years, yet Trump’s trade comments helped limit losses. The U.S. Dollar Index (DXY) remains near 107.00, while U.S. Treasury yields stand at 4.52% for 10-year bonds.

Key global risks impacting AUD/USD:
🔹 U.S. Inflation Data: Fed’s rate path could shift depending on CPI readings.
🔹 China’s Economic Performance: As Australia’s largest trading partner, China’s policies will impact AUD.
🔹 Risk Sentiment: Tariff escalations or geopolitical risks could drive further market volatility.

Technical Analysis: Will AUD/USD Break Above Resistance?

🔹 AUD/USD is trading around 0.6330, testing the nine-day EMA support level
🔹 Key resistance is at 0.6400, aligning with the upper boundary of the ascending channel
🔹 14-day RSI remains above 50, suggesting continued bullish momentum
🔹 If AUD/USD breaks 0.6400, next targets are 0.6450 and 0.6500
🔹 On the downside, support lies at 0.6326 (9-day EMA) and 0.6300 psychological level

Key Takeaways:

✅ AUD/USD gains momentum amid Trump’s trade deal speculation
✅ RBA’s rate cut to 4.10% fuels short-term volatility
✅ U.S. inflation & Fed policy stance remain critical for AUD/USD trajectory
✅ Technical analysis: AUD/USD faces key resistance near 0.6400

Final Thoughts: What’s Next for AUD/USD?

The Australian Dollar remains sensitive to shifts in trade policies, RBA decisions, and Fed signals. With Trump’s tariff threats adding uncertainty, investors should closely monitor economic data and risk sentiment for short-term trading opportunities.

📉 Will AUD/USD hold above 0.6300, or will U.S. rate policy drive further losses? Share your thoughts below!

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