- Trump vowed to impose tariffs on Mexico, China and Canada.
- Market participants are awaiting Australia’s inflation report due on Wednesday.
- Traders are monitoring the upcoming FOMC meeting minutes for clues on future Fed moves.
The AUD/USD price analysis shows a vulnerable Aussie as Trump’s tariff threats on China weigh on the Yuan. On the other hand, the dollar strengthened as the outlook for the US economy brightened.
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US President-elect Donald Trump vowed to impose tariffs on China, sinking the yuan. China is Australia’s main trading partner. As a result, the Aussie reflects moves in the yuan. Consequently, the tariff threats also weighed on the Australian dollar. High tariffs will reduce demand for Chinese goods in the US, hurting China’s economy.
On the other hand, Trump’s tariff vows have brightened the outlook for the US economy. Consumers will buy more local goods, boosting business performance and increasing inflation.
Meanwhile, market participants are awaiting Australia’s inflation report due on Wednesday. RBA policymakers have remained hawkish despite weak economic data. The central bank is waiting for a clear downtrend in the economy to signal rate cuts.
According to economists, the CPI might increase by 2.5%, higher than the previous reading of 2.1%. A higher-than-expected reading will support the RBA’s hawkish stance. On the other hand, downbeat figures might increase expectations for rate cuts in early 2025.
Elsewhere, traders are monitoring the upcoming FOMC meeting minutes for clues on future Fed moves. Policymakers voted to lower borrowing costs by 25-bps soon after Trump won the election. However, since then, most have assumed a cautious tone due to the likelihood of high inflation under Trump’s administration. Hawkish minutes might further lower expectations for a December Fed rate cut.
AUD/USD key events today
- US CB consumer confidence
- FOMC meeting minutes
AUD/USD technical price analysis: Bearish breakout looms despite a pause
On the technical side, the AUD/USD price is consolidating between the 0.6550 resistance and the 0.6450 support. Within this range, bears are in the lead since the price trades below the 30-SMA. At the same time, the RSI sits in bearish territory below 50.
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Furthermore, the price is making lower highs and lows on a larger scale, indicating a downtrend. Consequently, there is a high chance the price will break out of the range. A break below 0.6450 will confirm a continuation of the previous downtrend, as the price would make a lower low.
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Saqib Iqbal
