The Australian Dollar (AUD) is facing a decline against the US Dollar (USD) as concerns arise over potential tariffs on Chinese goods from US President-Elect Donald Trump. This could have a negative impact on the AUD, as Australia heavily relies on China for exports. Meanwhile, Australia’s Westpac Consumer Confidence index saw a 5.3% increase in November, reaching 94.6 points, indicating improved consumer sentiment. However, the index has remained below 100 for nearly three years, showing that pessimists still outnumber optimists.
The US Dollar continues to strengthen following Trump’s victory in the US elections. Analysts suggest that Trump’s fiscal policies could boost investment, spending, and labor demand, raising inflation risks. This potential scenario might lead the Federal Reserve (Fed) to adopt a more restrictive monetary policy, further strengthening the USD and putting pressure on the AUD/USD pair. Traders are eagerly awaiting the US Consumer Price Index data release on Wednesday for insights into future US policy decisions.
Despite the downward pressure on the Aussie Dollar, the Reserve Bank of Australia (RBA) Governor Michele Bullock remains hawkish on monetary policy, stressing the need for a stricter approach due to inflation risks and a strong labor market. Additionally, lower-than-expected Chinese Consumer Price Index (CPI) data added to the AUD’s struggles. However, China’s recent stimulus measures fell short of expectations, leading to further dampened demand prospects for Australia’s largest trading partner.
Minneapolis Fed President Neel Kashkari mentioned the US economy’s resilience as efforts continue to curb inflation. Although the Fed has recently lowered interest rates, Powell reiterated that the Fed would assess economic data to determine future rate changes. Morgan Stanley predicts that the Trump administration’s macroeconomic policies will focus on tariffs, immigration, and fiscal measures, with an immediate imposition of tariffs expected.
Technical analysis shows that the AUD/USD pair remains below the nine-day Exponential Moving Average (EMA) near 0.6600, indicating short-term downward pressure. Immediate support levels for the pair are at 0.6512 and 0.6500, while resistance levels are at 0.6596 and 0.6609. A break above these resistance levels could push the pair higher towards its three-week high of 0.6687.
Overall, the Australian Dollar is facing challenges due to concerns over potential tariffs on Chinese goods and lower-than-expected Chinese CPI data. The US Dollar’s strength, driven by Trump’s victory and potential fiscal policies, is also putting pressure on the AUD/USD pair. Traders are closely monitoring the US inflation data release for further insights into future US policy decisions. The RBA’s commitment to a hawkish monetary policy and China’s stimulus measures will play crucial roles in determining the future trajectory of the Australian Dollar.
