During the European session on Wednesday, the AUD/USD exchange rate ended a three-day decline and is currently consolidating around 0.6000, supported by US President Trump’s remarks that he is willing to negotiate with trading partners. Despite the recent high market volatility, the Australian dollar has formed a potential support signal on the daily chart, triggering market discussions about the possibility of a short-term rebound.
Fundamental analysis
Global trade tensions remain the main factor affecting the AUD/USD exchange rate. The U.S. Customs and Border Protection announced on Tuesday that it is ready to begin imposing country-specific tariffs on 86 trading partners. Although Trump said he was not considering suspending his broad tariff plan, he was open to negotiations, which brought a glimmer of hope to the market.
Australia’s economic outlook remains fragile, with both business and consumer confidence sluggish. Australia’s consumer confidence index fell 6% in April, the first decline since January this year. The business confidence index fell to -3 in March, the lowest level since November last year. The weak data reinforced market expectations for a more dovish shift in the Reserve Bank of Australia (RBA), with markets now pricing in up to 100 basis points of rate cuts this year, starting in May, with further cuts possible in July and August.
Chicago Fed President Goolsbee stressed the importance of fully assessing economic data before deciding on future monetary policy steps. According to the CME FedWatch tool, traders are increasingly betting on a 25 basis point rate cut in May, though the market generally still sees a July cut as the more likely scenario, with total rate cuts expected to exceed 100 basis points by the end of the year.
The U.S. dollar index (DXY) fell below 102.50, but downside appears limited as the U.S. 10-year Treasury yield rises. The rise in yields reflects the market’s higher demand for returns amid increased uncertainty caused by escalating global trade tensions.
Technical analyst interpretation:
The 120-minute chart shows that the AUD/USD exchange rate has formed a clear downward trend from the 0.6388 high, creating a series of lower highs and lower lows. The exchange rate has now fallen below the key support of 0.6060, suggesting that short-term downward pressure continues. From the moving average system, MA55 (0.6112) is clearly tilted downward, and the exchange rate is trading below the main moving average, indicating that bears dominate the market. The MACD indicator is running below the zero axis, and the distance between the DIFF line (-0.0027) and the DEA line (-0.0032) is widening, but it is worth noting that the MACD histogram has begun to shorten, which may indicate a weakening downward momentum. The RSI indicator hovers at the 46.0550 level and has not yet reached the oversold area, indicating that there is further room for downward movement.
Outlook for the future
Short-term outlook: The AUD/USD exchange rate is currently near the key support area of ​​0.5950-0.6000. Both the RSI and CCI indicators show an oversold state, which may trigger a technical rebound. If a rebound occurs, the primary resistance level is 0.6060 (previous support turned into resistance), and further resistance is at the 0.6090 level. However, given the fundamental pressure and the fact that the technicals broke through important support levels, the rebound may be a rebound in a bear market rather than a trend reversal. In the short term, the exchange rate may fluctuate and consolidate in the 0.5900-0.6100 range, waiting for the next clear directional catalyst.
Medium- to long-term outlook: AUD/USD is still in a downtrend, and the death cross signal on the daily chart and the downward wedge breakout suggest a bearish medium-term outlook. Global trade tensions and weak Australian economic data may continue to put pressure on the Australian dollar. Unless the exchange rate can regain the 0.6200 level and stabilize, downside risks will continue to exist. If global risk sentiment deteriorates further, the exchange rate may test the long-term support of the 0.5800-0.5850 area. While an unexpected easing of trade tensions may provide breathing space for the Australian dollar, a breakout of the 0.6250-0.6300 resistance band will be a necessary condition to confirm a true bull reversal.
The market is paying attention to the US inflation data to be released this week, which will have a significant impact on the Fed’s expectations of rate cuts in the coming months.
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