Macro aspect:
The US dollar is in a weak cycle, and most non-US currencies are appreciating. For example, EURUSD has broken through the 1.1000 mark, and USDJPY has also been stable below 150.00. However, the Australian dollar has fallen instead of rising, and its depreciation rate ranks high among non-US currencies. The weak cycle of the US dollar will indeed boost the Australian dollar, but since the Australian dollar is a commodity currency, the currency value is linked to the price fluctuations of commodities, so in the context of Trump’s radical policies leading to a general decline in commodity prices, the potential for appreciation of the Australian dollar is relatively weak.
At the beginning of this month, the Reserve Bank of Australia announced that the interest rate decision would maintain the benchmark interest rate at 4.1%. At that time, market participants had strong expectations for the appreciation of the Australian dollar, because compared with the Fed’s rate cut rhythm, the Reserve Bank of Australia was obviously more restrained. However, it now seems that the core factors affecting the value of the Australian dollar have shifted from monetary policy to commodity price trends and Trump’s policy changes. The Reserve Bank of Australia can hardly prevent funds from flowing out of Australia with only a benchmark interest rate of 4.1%.
So far this month, the cumulative decline in iron ore prices has exceeded 11%, copper prices have fallen by more than 12%, and nickel prices have also fallen by more than 10%. Australia’s basic ores for export are all in a monthly downward trend. There is no sign of a rebound in the short term, and it is possible that they will enter a downward trend as Trump’s policies are implemented. According to export data, Australia’s total exports in February this year were 42.3 billion Australian dollars, far lower than the previous value of 43.9 billion Australian dollars. If the total exports continue to decline in March, the value of the Australian dollar will also be hit.
Technical side:
From the perspective of trend structure, at the daily level, AUDUSD maintained a central oscillation structure from the end of last year to the end of March, and no band was too far away from the central area during this period. On April 4, AUDUSD fell sharply, with a single-day drop of 345 basis points and a minimum of 0.5985, setting a new low since April 2020. This day was the day when Trump announced his radical foreign policy. On the first trading day after that (April 7), iron ore, copper ore, and nickel ore ushered in a sharp decline. Since the market price has seriously deviated from the central structure, it can be basically confirmed that a new round of AUDUSD downward trend has begun. However, for the sake of prudence, we need to wait for a round of rebound bands to observe whether the highest point of the rebound will re-enter the central range. If the highest point is below the lower track of the central axis, it is confirmed that a new round of downward trend has begun.
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