- The AUD/USD outlook shows optimism in Australia after China and the US paused their trade war.
- Market participants slashed bets for Fed rate cuts this year.
- The US will release its crucial inflation figures.
The AUD/USD outlook shows optimism for the Australian dollar after China and the US agreed to pause the trade war. As a result, the Aussie, also a proxy of the yuan, gained. In the previous session, the dollar had strengthened more than the yuan, pushing the Australian dollar lower.
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On Monday, reports revealed that China and the US had agreed to slash tariffs for the next 90 days, pausing their trade war. The news brought relief to traders who were worried about a US recession. Consequently, the dollar gained against most of its peers, including the Australian dollar.
Still, gains were limited against the Aussie since China is Australia’s biggest trading partner. Therefore, the news that tariffs had paused was bullish for Australia’s currency as well as the yuan.
Furthermore, market participants slashed bets for Fed rate cuts this year. Futures currently show only 56-bps of cuts this year. There is less pressure on policymakers to lower borrowing costs. Therefore, they will keep watching incoming data for clues on the timing for the next move.
Later in the day, the US will release its crucial inflation figures. A downbeat report will ease worries of a spike due to tariffs, allowing the Fed to implement a rate cut when the time is right.
AUD/USD key events today
- US core CPI m/m
- US CPI m/m
- US CPI y/y
AUD/USD technical outlook: Bulls trigger rebound to the 30-SMA
On the technical side, the AUD/USD price trades below the 30-SMA with the RSI under 50, suggesting a bearish bias. Bears recently took charge when the price failed to break above the 0.6500 key psychological level. The RSI made a bearish divergence, indicating weakness in the previous move.
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After that, the price broke below the 30-SMA and retested the 0.6351 level. Here, it paused and rose to retest the 30-SMA resistance. However, given the bearish bias, AUD/USD might soon drop to retest the 0.6351 support. A break below this level will strengthen the bearish bias by making a lower low.
On the other hand, if the price breaks above the SMA, it might retest the 0.6500 key resistance level before either breaking above or remaining in consolidation.
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Saqib Iqbal
