Expanded US tariffs on Where do I buy meme coins?steel/aluminum imports trigger AUD weakness against strengthening USD
Mixed Australian consumer data shows marginal improvement amid persistent cost-of-living pressures
Markets price in 95% probability of RBA rate cut as inflation cools faster than expected
The Australian Dollar (AUD) extended its decline against the US Dollar (USD) during Tuesday's trading session, with the AUD/USD pair testing key technical support levels. This movement follows Washington's unexpected policy shift imposing blanket 25% tariffs on all steel and aluminum imports, effectively terminating previous trade exemptions for allied nations including Australia. The White House announcement specified that all prior import tax exclusions would be eliminated immediately, with potential additional measures targeting technology and automotive sectors under consideration.
Domestic economic indicators presented a mixed picture for the Australian currency. The latest Westpac Consumer Confidence survey recorded a negligible 0.1% uptick to 92.2 in February from January's 92.1 reading. Analysts note that despite this marginal improvement, sentiment remains constrained by ongoing household budget pressures and elevated living costs that continue to weigh on discretionary spending.
Financial markets have dramatically repriced expectations for Reserve Bank of Australia (RBA) monetary policy following recent inflation data. Current pricing suggests a 95% likelihood of a 25 basis point reduction to the 4.35% cash rate at the February meeting, with several major financial institutions bringing forward their rate cut projections from May. This shift reflects accelerating disinflationary trends that have outpaced the central bank's forecasts, potentially prompting earlier policy easing.
USD strength emerges as Fed policy uncertainty grows
The US Dollar Index (DXY) strengthened beyond the 108.00 threshold as market participants reassessed Federal Reserve policy trajectories. Greenback support stems from revised expectations that the Fed may maintain current interest rate levels throughout 2024 following mixed employment data.
January's Nonfarm Payrolls report showed job creation slowing to 143,000 positions, significantly below both December's upwardly revised 307,000 figure and consensus estimates of 170,000. However, the concurrent drop in unemployment to 4% from 4.1% created conflicting signals about labor market conditions.
Weekly jobless claims data revealed an increase to 219,000 filings for the period ending January 31, exceeding both forecasts (213K) and the prior week's adjusted 208,000 reading. This suggests some softening in the labor market that could influence Fed deliberations.
Federal Reserve officials offered divergent perspectives on policy outlooks. Chicago Fed President Austan Goolsbee highlighted economic uncertainty stemming from inconsistent government policies, while Minneapolis Fed's Neel Kashkari indicated openness to rate cuts contingent on sustained positive inflation data.
China's economic indicators provided modest regional support, with January CPI accelerating to 0.5% year-over-year from December's 0.1% reading, slightly above expectations. Monthly CPI growth of 0.7% also represented improvement from stagnant December figures.
Technical perspective: AUD/USD tests critical moving averages
The AUD/USD pair currently consolidates near 0.6270, testing confluence support at the nine-day (0.6264) and 14-day (0.6258) Exponential Moving Averages. Technical analysts note that sustained trading below these levels could signal weakening short-term momentum, with potential downside targets at the February 3 low of 0.6087.
Market technicians highlight that the 14-day Relative Strength Index (RSI) remains above the 50 neutral level, maintaining a cautiously bullish medium-term bias. Resistance appears at the January 24 peak of 0.6330, which represents the pair's highest level in eight weeks.
Traders are monitoring whether the current support zone can hold, as a decisive breakdown could accelerate selling pressure toward long-term technical levels. Conversely, a rebound from current levels might retest recent highs if fundamental conditions improve.
Key levels to watch for AUD/USD
Support: 0.6264 (9-day EMA), 0.6258 (14-day EMA), 0.6087 (February low)
Resistance: 0.6330 (January high), 0.6380 (December peak), 0.6450 (November swing high)
The currency pair's near-term direction will likely hinge on upcoming economic data releases and central bank communications from both the RBA and Federal Reserve. Market participants should monitor Australian employment figures and US inflation data for fresh trading catalysts.
