- The risk-sensitive Australian dollar soared after Trump won the US election.
- The US Central Bank lowered borrowing costs by 25-bps.
- Trump’s presidency will likely lead to higher inflation due to his policies.
The AUD/USD price analysis shows increased bullish enthusiasm due to a surge in risk appetite after Trump’s win. However, the price eased by Friday as market participants waited for China to announce new stimulus for its fragile economy.
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The risk-sensitive Australian dollar soared after Trump won the US election. Trump’s policies are known to improve business conditions and boost inflation. As a result, his win brought back money into risky currencies and assets like equities.
Elsewhere, market participants eagerly await the conclusion of a meeting in China that might result in more stimulus measures.
Meanwhile, on Thursday, the US Central Bank lowered borrowing costs by 25-bps. Furthermore, the Fed struck a cautious tone regarding future rate cuts. However, markets still expect another rate cut in December. At the same time, AUD/USD rallied as the dollar retreated after the impact of the Trump win wore off.
Trump’s presidency will likely lead to higher inflation due to his policies. The Republican president has proposed tax cuts and tariffs on imported goods, among other changes that will likely increase price pressure in the US. Therefore, the Fed has a difficult challenge ahead. If inflation spikes, policymakers might have to pause rate cuts and even consider hiking. Such an outcome would boost the dollar.
At the same time, it will reduce the policy divergence between the Fed and the RBA. Notably, the Reserve Bank of Australia kept rates unchanged this week, with policymakers remaining cautious about inflation. Moreover, markets do not expect a rate cut in Australia until May next year.
AUD/USD key events today
Market participants do not expect any high-impact reports from Australia or the US.
AUD/USD technical price analysis: Bulls assert dominance with a higher high
On the technical side, the AUD/USD price has made a new high above the 0.6650 resistance level. At the same time, the price trades well above the 30-SMA, with the RSI above 50, suggesting a bullish trend.
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However, the uptrend has paused, allowing bears to prompt a pullback. If the price finds support near the 0.6650 level, it will bounce higher to make new highs. However, it might puncture this level to retest the 30-SMA before climbing.
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Saqib Iqbal
