- Trump has promised to impose tariffs on Mexico, China and Canada.
- Market participants await the Australian inflation report on Wednesday.
- Traders are watching the upcoming FOMC meeting minutes for clues about the Fed’s future moves.
AUD/USD price analysis shows vulnerable Aussie as Trump’s tariff threats to China weigh on yuan. On the other hand, the dollar strengthened as the outlook for the US economy improved.
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US President-elect Donald Trump has vowed to impose tariffs on China, sinking the yuan. China is Australia’s main trading partner. As a result, the Aussie mirrors the movement in the Yuan. Accordingly, tariff threats also weighed on the Australian dollar. High tariffs will reduce demand for Chinese goods in the US, which will hurt 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, boosting business performance and increasing inflation.
Meanwhile, market participants await the Australian inflation report due on Wednesday. RBA policymakers remained hawkish despite weak economic data. The central bank is waiting for a clear downward trend in the economy, which will signal a reduction in interest rates.
According to economists, the CPI could rise by 2.5%, up from the previous reading of 2.1%. The higher-than-expected reading will support the RBA’s hawkish stance. On the other hand, poor data could raise expectations for a rate cut in early 2025.
Elsewhere, traders are watching the upcoming minutes of the FOMC meeting for clues about the Fed’s future moves. Policymakers voted to cut borrowing costs by 25 basis points shortly after Trump won the election. Since then, however, most have taken a cautious tone over the likelihood of high inflation under the Trump administration. The hawkish minutes could further reduce expectations for a December Fed rate cut.
AUD/USD key events today
- US CB Consumer Confidence
- Minutes of the FOMC meeting
AUD/USD Price Technical Analysis: Bearish breakout looms despite pause
From the technical side, AUD/USD price is consolidating between 0.6550 resistance and 0.6450 support. In this range, the bears are in the lead as the price is trading below the 30-SMA. At the same time, the RSI is in bearish territory below 50.
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Furthermore, the price is making lower highs and lows on a larger scale, indicating a downtrend. Consequently, there is a high chance that the price will go out of range. A break below 0.6450 will confirm a continuation of the previous downtrend, as the price would make a lower low.
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