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Australian Dollar Rises Amid Trade Turmoil, Fed Uncertainty, and China's Upbeat Economic Data
Economic
Summary:
The Australian Dollar (AUD) climbed against the US Dollar (USD) as global markets responded to the People's Bank of China's (PBoC) decision to hold key lending rates steady.
Buy
CLOSEDAUDUSD
End Time
0.64099
Entry Price
0.65425
TP
0.63100
SL
0.64037 +0.00046 +0.07%
102
Points
Profit
0.63100
SL
0.64201
CLOSING
0.64099
Entry Price
0.65425
TP
The Australian Dollar opened the week with renewed strength, recovering from prior session losses as it rode a wave of broad-based US Dollar weakness and a modest pickup in risk sentiment. This recovery came on the back of key decisions and data points from both China and the United States, as well as growing geopolitical friction that could reshape the near-term outlook for global trade.
The People's Bank of China (PBoC) held its one-year Loan Prime Rate (LPR) unchanged at 3.10% and maintained the five-year rate at 3.60%, in a widely anticipated decision that signaled stability rather than further stimulus. While the decision itself did not shock the market, it provided reassurance that Beijing is confident in the current trajectory of its post-COVID recovery. For Australia, whose economy is heavily tethered to Chinese demand for raw materials, such as iron ore and coal, this was a subtle but meaningful vote of confidence.
However, it was not just China’s monetary stance that shaped the market narrative. Tensions between Washington and Beijing surged again after the Biden administration moved to impose tariffs on Chinese vessels docking at US ports. This escalatory move, aimed ostensibly at protecting American shipping and port security, sent shivers through global logistics and raised the specter of a new chapter in the trade war saga.
Yet, in a somewhat contradictory tone, President Donald Trump — who continues to influence economic policy discourse despite no longer holding office — announced that certain key technology products would be exempted from the proposed “reciprocal” tariffs. These exemptions primarily concern tech components produced in China, further underscoring Australia’s indirect exposure to any easing or tightening in US-China trade dynamics. Trump later noted that China had made conciliatory overtures and that he was “not looking to go higher on China tariffs,” adding a degree of market relief. He even expressed optimism that a deal could be reached in as little as three to four weeks, tempering the earlier tension with cautious hope.
The net effect was clear: risk appetite improved, and the US Dollar began to slip, dragging the US Dollar Index (DXY) down to around 98.50 — its lowest level since April 2022. The sharp decline was exacerbated by a fall in the 2-year Treasury yield, which dropped more than 1% to 3.75%, reflecting investor expectations that the Federal Reserve may soon need to pivot its policy in light of a softening economy and cooling inflation.
Indeed, the latest US Consumer Price Index (CPI) print confirmed that price pressures are moderating. Headline CPI eased to 2.4% year-on-year in March, down from 2.8% in February and below expectations of 2.6%. Core CPI, which strips out volatile food and energy components, came in at 2.8% versus a forecast of 3.0%. On a monthly basis, the headline figure dipped by 0.1%, while core prices edged up a mere 0.1%.
While disinflation is broadly welcomed by the market, it now collides with worrying signs of economic fatigue. Federal Reserve Chair Jerome Powell cautioned that the US faces the dual risk of a stagnant economy alongside stubborn inflation — a stagflation scenario that complicates policy responses. Powell’s remarks were overshadowed, however, by reports that President Trump is mulling the possibility of removing Powell from his position, reflecting growing political frustration over the Fed’s cautious approach. White House economic adviser Kevin Hassett later confirmed that the idea was under discussion, although the immediate market reaction was relatively muted.
In terms of labor market data, the picture remains mixed. Initial jobless claims for the week ending April 12 fell to 215,000 — better than expected — but continuing claims rose to 1.885 million, suggesting that while layoffs may be slowing, displaced workers are struggling to re-enter the workforce. This labor market dynamic, combined with softer inflation, suggests the Fed may face intensifying pressure to consider rate cuts sooner than previously planned.
Back in Australia, the economic signals were similarly nuanced. The unemployment rate ticked up to 4.1% in March, just shy of expectations at 4.2%, while net job creation stood at 32,200 — a healthy figure but below the forecast of 40,000. At the same time, the Westpac Leading Index’s six-month annualized growth rate eased to 0.6% in March from 0.9% in February, hinting at some softening in forward-looking momentum.
Minutes from the Reserve Bank of Australia’s (RBA) March 31–April 1 meeting revealed ongoing uncertainty around the timing of the next interest rate adjustment. While the Board flagged the upcoming May meeting as a potential opportunity to reassess policy, it emphasized that no decision had yet been made, pointing to the wide range of upside and downside risks that continue to confront the Australian economy.
Meanwhile, China delivered a strong batch of macroeconomic data, providing crucial support for the Aussie. The Chinese economy expanded by 5.4% in the first quarter of 2025, matching the growth pace seen in the previous quarter and exceeding forecasts of 5.1%. On a quarterly basis, GDP rose 1.2%, slightly below the 1.4% estimate but still resilient. Retail sales in China surged by 5.9% year-on-year, comfortably beating the 4.2% forecast and February’s 4% print. Industrial production jumped by 7.7%, far outpacing both the prior month and market expectations. For Australia, these figures serve as a strong tailwind, given the nation’s reliance on Chinese demand for its exports.
Technical Analysis
Technically, the AUD/USD pair has shifted from a protracted downtrend to a confirmed bullish reversal. The pair broke above its recent consolidation range, which had served as a resistance zone between 0.63875 and 0.64100. That zone now acts as strong support. Prices are currently trading above all key exponential moving averages (EMAs), which are aligned in a bullish formation, with each average trending upward. This technical configuration signals strong upward momentum and improves the outlook for further gains.
Moreover, the recent bullish engulfing candle at the breakout point confirms buyer interest and volume strength, lending credence to the view that this recovery is not merely a short-term bounce but the beginning of a more sustainable rally. The next significant resistance lies around 0.65425, a level where traders may begin to take profits.
TRADE RECOMMENDATION
BUY AUDUSD
ENTRY PRICE: 0.64100
STOP LOSS: 0.63100
TAKE PROFIT: 0.65425
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