Usman Salis
The Australian Dollar has extended its winning streak against the US Dollar for the fifth consecutive trading day, reaching the monthly high of 0.6380 despite growing trade tensions between the United States and China potentially threatening Australia's economic outlook.
AUD/USD Defies China Trade War Concerns
The AUD/USD pair continues to perform strongly in recent trading sessions, even as the escalating trade conflict between the United States and China casts shadow over the Australian economy's prospects. This resilience is particularly noteworthy given that historically, the Australian Dollar tends to underperform when China's economic outlook deteriorates, due to Australia's heavy reliance on exports to the Asian economic powerhouse.
US President Donald Trump has announced a 90-day suspension on implementing reciprocal tariffs for all trading partners except China. In response, China—the world's second-largest economy—has retaliated by imposing additional duties on goods imported from the United States, further intensifying the trade tensions between the two economic giants.
AUD/USD Gains as US Dollar Struggles
Meanwhile, the US Dollar is finding it difficult to maintain its recent position as market participants grow increasingly concerned about the potential negative impact of Trump's economic policies on the US economy in the near term. Analysts expect Trump's tariff policies to increase inflationary pressures while simultaneously slowing economic growth—a challenging combination for monetary policy management.
The US Dollar Index (DXY), which measures the Greenback's value against a basket of six major currencies, is trading cautiously just above the three-year low of 99.00, reflecting these concerns about the US economic outlook under the current policy direction.
AUD/USD Technical Analysis Points to Bullish Momentum
From a technical perspective, AUD/USD has extended its upward movement to approach the March 18 high of 0.6390, representing the highest level seen in over a month. The near-term outlook for the pair appears optimistic as it maintains positions above both the 20-day and 50-day Exponential Moving Averages (EMAs), which are trading around 0.6244 and 0.6270, respectively.
The 14-day Relative Strength Index (RSI) has climbed to approximately 58.00 after making a V-shaped recovery from below 40.00, indicating a strong bullish reversal in market sentiment for the pair. This technical indicator suggests gathering momentum for further upside potential.
If the AUD/USD pair successfully breaks above the March 18 high of 0.6390, it could open a path toward the December 5 high of 0.6456, followed by the psychologically significant resistance level of 0.6500. These levels would represent important targets for bulls in the coming trading sessions.
Conversely, should the pair reverse course and move below the March 4 low of 0.6187, it could find itself exposed to further downside pressure, potentially testing the February low of 0.6087, with the psychological support level of 0.6000 serving as the next significant barrier.
The daily chart analysis of AUD/USD reveals that despite the concerning macroeconomic backdrop involving US-China trade tensions, technical indicators are currently pointing toward continued strength for the Australian Dollar against its US counterpart, at least in the short term.
As global markets continue to digest the implications of renewed trade tensions and their potential impact on global growth, the AUD/USD pair's performance will likely be influenced by both technical factors and broader sentiment around the economic outlooks for Australia, China, and the United States in the coming weeks.
Usman Salis
