Australian Dollar Faces Decline Amid Trade Tensions

  • The Australian Dollar (AUD) continues its downward trend against the US Dollar (USD) for the sixth consecutive session.
  • US President Donald Trump’s decision to impose tariffs on China, Canada, and Mexico impacts market sentiment.
  • China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) falls to 50.1 in January, below market expectations.

The AUD/USD pair dropped approximately 2% as risk-off sentiment prevails following the announcement of import tariffs by US President Donald Trump. The tariffs are set to affect China, a significant trading partner for Australia.

According to Bloomberg, the US plans to levy 25% tariffs on Canadian and Mexican goods and 10% tariffs on Chinese exports starting Tuesday until the fentanyl overdose crisis is resolved.

Canada, Mexico, and China have expressed intentions to retaliate against the imposed tariffs, with China warning that this move could impact future cooperation on drug control.

Additionally, Australia’s Retail Sales declined by 0.1% month-on-month in December 2024, indicating a potential slowdown in consumer spending. Speculation arises about a possible rate cut by the Reserve Bank of Australia (RBA) in February.

Market Indicators and Economic Data

  • The US Dollar Index (DXY) rises for the fifth consecutive day, trading above 109.50.
  • US Personal Consumption Expenditures (PCE) Price Index shows a 0.3% month-on-month increase in December, with an annual inflation rate of 2.6%.
  • Gross Domestic Product Annualized (Q4) falls to 2.3%, missing expectations, while Initial Jobless Claims for the week ending January 24 improve to 207K.
  • Fed Chair Jerome Powell emphasizes the need for progress on inflation or labor market weakness before considering monetary policy adjustments.

Implications and Predictions

  • US Treasury Secretary Scott Bessent’s changing stance on tariffs and the US Dollar’s impact on industrial resurgence raise concerns.
  • President Trump’s threats of 100% tariffs on BRICS nations in response to alternative currency proposals add to market uncertainties.
  • Australia’s Retail Sales show a year-over-year increase, but analyst forecasts predict an RBA rate cut in February.

AUD/USD Technical Analysis

The AUD/USD pair is trading below a descending channel pattern, indicating a bearish trend. The RSI near the 30 mark suggests further downside potential.

If the pair continues to decline, it may test the psychological support level at 0.6131. Alternatively, a rebound could see the pair re-enter the descending channel towards the upper boundary at 0.6217.

Daily Chart Analysis

AUD/USD Daily Chart

Australian Dollar Performance Today

The table below shows the percentage change of the Australian Dollar (AUD) against major currencies today. AUD weakened against the US Dollar (USD) compared to other currencies.


  USD EUR GBP JPY CAD AUD NZD CHF
USD 1.89% 0.92% 0.81% 1.59% 0.20% 0.22% 0.89%

The heat map illustrates the percentage changes of major currencies against each other, with the base currency on the left column and the quote currency on the top row.

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