AUD/USD Price Analysis: Trump’s Tariff Threats Weaken AUD

• Trump promised to impose tariffs on Mexico, China and Canada.

• Market participants are waiting for Australia’s inflation report to be released on Wednesday.

• Traders are watching minutes from the upcoming FOMC meeting for clues about future Fed moves.

AUD/USD price analysis shows a vulnerable Australian as Trump’s tariff threats against 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 promised to impose tariffs on China and lower the yuan. China is Australia’s most important trading partner. As a result, the Aussie mirrors the movements of the Yuan. As a result, the tariff threats also weighed on the Australian dollar. High tariffs will reduce demand for Chinese goods in the United States and harm the Chinese economy.

On the other hand, Trump’s tariff promises have brightened the outlook for the US economy. Consumers will buy more local goods, increasing business performance and increasing inflation.

Meanwhile, market participants are awaiting Australia’s inflation report due out on Wednesday. RBA policymakers remained hawkish despite weak economic data. The central bank is waiting for a significant downturn in the economy to announce interest rate cuts.

According to economists, the CPI could rise by 2.5%, above the previous value of 2.1%. A higher than expected reading will support the RBA’s hawkish stance. On the other hand, poor numbers could increase expectations for interest rate cuts in early 2025.

Elsewhere, traders are watching minutes from the upcoming FOMC meeting for clues about future Fed moves. Policymakers voted to cut borrowing costs by 25 basis points shortly after Trump’s election victory. However, due to the likelihood of high inflation under Trump’s administration, most have adopted a cautious tone since then. The restrictive protocols could further lower expectations for a Fed rate cut in December.

AUD/USD Key Events Today

• US CB consumer confidence
• FOMC meeting minutes

AUD/USD Technical Price Analysis: Bearish breakout looms despite pause

On the technical side, AUD/USD price is consolidating between the resistance at 0.6550 and the support at 0.6450. In this area, the bears are on top as the price is below the 30-SMA. At the same time, the RSI is in the bearish zone below 50.

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Furthermore, the price is making lower highs and lower lows on a larger scale, indicating a bearish trend. Consequently, there is a high probability that the price will break out of this range. A break below 0.6450 would confirm a continuation of the previous downtrend as the price would make a lower low.

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