The Australian Dollar (AUD) recovered on Monday, reversing losses against the US Dollar (USD) due to concerns about a possible slowdown in the US economy. Recent Australian GDP growth and trade data also aided this recovery.
The Reserve Bank of Australia’s latest Meeting Minutes expressed caution about further interest rate cuts. However, the AUD faced pressure from disappointing Chinese Consumer Price Index data, impacting trade given China’s importance to Australia.
Us Dollar Index Movement
The US Dollar Index (DXY) fell for the fifth consecutive day, trading around 103.80, although rising US Treasury yields may limit this decline. The US Bureau of Labor Statistics reported Nonfarm Payrolls increased by 151,000 in February, below expectations.
US Commerce Secretary noted that recently imposed tariffs are likely to remain in place despite pressures from steelmakers. President Trump commented on prospects for US discussions with Ukrainian officials while addressing tariffs related to Russia.
Australia’s GDP grew by 0.6% in Q4 2024, outperforming expectations. The trade surplus rose to 5,620 million in January, aided by a 1.3% increase in exports.
China’s Consumer Price Index fell by 0.7% year-on-year for February, indicating consumer deflation for the first time since January 2024. The Producer Price Index also declined by 2.2%, marking the slowest decline since August 2024.
Australian Dollar Technical Outlook
AUD/USD traded near 0.6320, suggesting short-term strength, with resistance levels identified at 0.6400 and 0.6408. Immediate support is at the nine-day Exponential Moving Average of 0.6301, where a break could lead to further declines.
A positive Trade Balance can bolster the Australian Dollar, as higher export demand strengthens its value.
What we have seen here is a recovery for the Australian Dollar following recent losses against the Greenback. Concerns about slower economic growth in the United States pushed the American currency down, giving the AUD some room to bounce back. On top of that, stronger-than-anticipated GDP growth in Australia, alongside a boost in trade figures, provided additional support.
Minutes from the Reserve Bank of Australia’s latest meeting have been careful in their wording, highlighting a degree of restraint regarding future interest rate cuts. Still, the Australian Dollar hasn’t had an entirely smooth run. Weak inflation data from China, a top trading partner, applied pressure. With the latest Chinese Consumer Price Index data showing annual deflation in February and producer prices continuing their decline, there are broader concerns about demand in the region.
Meanwhile, the US Dollar Index has been on a downward trajectory, marking its fifth straight day in the red, hovering near 103.80. At the same time, rising US Treasury yields could slow or even halt this decline. Labour data out of the US added an extra layer to the equation. Nonfarm Payroll numbers came in below forecasts, landing at 151,000 new jobs for February.
There’s also been discussion around trade policy. While pressures exist from the steel industry, tariffs remain largely untouched, as confirmed by the US Commerce Secretary. Additionally, remarks from the former President touched on US discussions with Ukrainian officials, which factored into the broader economic view.
On Australia’s side, economic data has stood in contrast to these concerns abroad. Fourth-quarter GDP expanded by 0.6%, outpacing estimates. At the same time, the trade surplus rose to 5,620 million in January, helped by a 1.3% lift in exports—a positive sign for those watching external demand for Australian goods.
However, China’s lower consumer prices are worth monitoring. A 0.7% decline year-on-year in February has raised eyebrows, alongside a more moderate fall in producer prices—now easing at 2.2%, the slowest pace recorded since August. This trend could weigh on Australian export demand if sustained.
Looking at price action, AUD/USD has pushed towards the 0.6320 level, showing resilience despite headwinds. On the upside, traders are watching resistance near 0.6400 and 0.6408, where selling may emerge if the pair reaches those levels. Support has been identified at the nine-day Exponential Moving Average, currently sitting at 0.6301. If the price dips below this point, further declines are possible.
With Australian trade conditions improving, demand for exports continuing, and the US Dollar under some pressure, the next few weeks could be telling.
