The AUD/USD pair fell by approximately 0.54%, nearing 0.6200 and marking a three-week low after a six-day decline. Contributing factors included a proposal for an additional 10% tariff on Chinese imports by President Trump and disappointing Australian Private Capital Expenditure data, which shrank by 0.2% in Q4 2024 against a forecast of 0.8%.
The US Personal Consumption Expenditures (PCE) data rose by 0.3% month-on-month in January, in line with expectations. The Australian dollar is affected by various factors, including interest rates set by the Reserve Bank of Australia, the state of the Chinese economy, and the price of Iron Ore.
Moreover, the trade balance influences the AUD’s value, with a positive balance generally strengthening the currency. Immediate support for the AUD/USD may be around the 0.6150 level, while resistance is likely near the 20-day Simple Moving Average if market sentiment improves.
This latest move in the AUD/USD pair reflects the weight of both domestic and global pressures on the Australian dollar. A slide of 0.54% might not seem extreme in isolation, but a six-day losing streak leading to a three-week low suggests a shift in sentiment. It isn’t just the broader market mood—specific economic indicators are pointing to the same direction.
Adding friction to the Australian dollar’s performance was Trump’s proposal for an additional 10% tariff on Chinese imports. Markets tend to react quickly to such announcements, as any potential economic burden on China may have a knock-on effect on Australia. With a deep trade relationship between the two countries, anything that slows Chinese demand can ripple through to Australia’s exports, particularly commodities like iron ore.
The latest data on Australian Private Capital Expenditure didn’t help either. A 0.2% contraction in Q4 2024, when economists had expected a 0.8% rise, doesn’t exactly inspire confidence. Weakness in capital expenditure often signals hesitancy among businesses to invest, which can be a reflection of broader uncertainties in the economy. If firms aren’t comfortable expanding, job markets and consumer spending could eventually feel the strain.
Meanwhile, across the Pacific, the US Personal Consumption Expenditures (PCE) data for January was exactly as expected, rising by 0.3% month-over-month. Given that PCE is the Federal Reserve’s preferred inflation gauge, a solid reading without surprises tends to keep rate expectations stable. It maintains the status quo rather than forcing traders to reposition heavily.
Interest rates set by the Reserve Bank of Australia remain among the defining factors for the Australian dollar’s strength. When rates are relatively high compared to other major economies, demand for the currency tends to pick up, as investors seek better returns. But if expectations shift toward cuts, downward pressure can build. The Chinese economy plays an equally critical role, given how much Australian exports rely on continued demand there. The third factor, iron ore prices, ties directly into that dynamic. If China slows, so might its appetite for raw materials, and that has a direct impact on Australia’s trade revenues.
Speaking of trade, Australia’s trade balance remains one of the key measures of support for the currency. A surplus typically reflects strong demand for Australian goods and services abroad, which can lend strength to the dollar. If exports falter or imports surge, that balance weakens, potentially leading to a softer currency.
At the moment, technical indicators suggest that support around the 0.6150 level could be an area of interest. If selling momentum persists, prices might gravitate toward that zone before finding more stability. On the upside, should risk appetite improve and fundamentals turn in Australia’s favour, resistance could emerge near the 20-day Simple Moving Average. From a short-term trading perspective, those are the levels worth watching, as they may determine the next round of price action in this pairing.
