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US Dollar Forecast: AUD/USD Vulnerable amid Threat of Trade War

Article By: ,  Strategist
February 3, 2025 9:25 PM

US Dollar Outlook: AUD/USD

AUD/USD tumbles to a fresh yearly low (0.6088) as the upcoming change in US trade policy dampens the outlook for growth in Asia/Pacific economies.

US Dollar Forecast: AUD/USD Vulnerable amid Threat of Trade War

AUD/USD clears the January low (0.6131) as US President Donald Trump imposes a 10% tariff on China, Australia’s largest trading partner, and the threat of a trade war may push the Reserve Bank of Australia (RBA) to unwind its restrictive policy as Governor Michele Bullock and Co. acknowledge that ‘the Board is gaining some confidence that inflation is moving sustainably towards target.’

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In turn, the US Dollar may continue to appreciate against its Australian counterpart ahead of the RBA meeting on February 18, and AUD/USD may track the negative slope in the 50-Day SMA (0.6303) as it still holds below the moving average.

As a result, the renewed weakness in AUD/USD may push the Relative Strength Index (RSI) towards oversold territory, and the oscillator may show the bearish momentum gathering pace should it push below 30 to mirror the extreme readings from last year.

With that said, developments coming out of the Trump Administration may continue to influence AUD/USD amid the threat of a trade war, but the exchange rate may consolidate over the coming days as President Trump offers to delays tariffs for Mexico after meeting with President Claudia Sheinbaum.

AUD/USD Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; AUD/USD on TradingView

  • AUD/USD registers a fresh yearly low (0.6088) following the failed attempt to push above the 50-Day SMA (0.6303), with a close below the 0.6130 (23.6% Fibonacci retracement) to 0.6170 (2022 low) region opening up the 0.5980 (April 2020 low) to 0.6020 (38.2% Fibonacci extension) zone.
  • Next area of interest comes in around 0.5930 (50% Fibonacci extension), but lack of momentum to close below the 0.6130 (23.6% Fibonacci retracement) to 0.6170 (2022 low) region may curb the recent decline in AUD/USD.
  • Need a move back above the 0.6240 (61.8% Fibonacci extension) to 0.6270 (2023 low) zone for another run at the moving average, with a breach above 0.6318 (November 2023 low) bringing the January high (0.6331) on the radar.

Additional Market Outlooks

USD/CAD Clears 2020 High as Trump Tariff Looms

EUR/USD Pulls Back Ahead of December High

GBP/USD Holds Below 50-Day SMA Ahead of BoE Rate Decision

Gold Price Rallies to Fresh Record High amid Limited Response to Fed

--- Written by David Song, Senior Strategist

Follow on X at @DavidJSong

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