HomeContributorsTechnical AnalysisAUD/USD Stagnates as US-China Trade War Begins

AUD/USD Stagnates as US-China Trade War Begins

  • AUD/USD remains below 20-SMA as the US and China exchange tariffs.
  • Downside risks persist; buyers eye 0.6330 for a bullish shift.

AUDUSD plummeted to a nearly five-year low of 0.6086 on Monday before bouncing back to the 0.6200 region. The recovery followed last-minute trade talks between the U.S. and its neighbors Mexico and Canada, which resulted in monthly delays.

On the other hand, 10% import tariffs against China went live today, prompting Beijing to retaliate with 15% levies on coal and liquefied gas and 10% tariffs on crude oil, farm equipment, and vehicles. Trade risks kept AUDUSD stagnant below its 20-day simple moving average (SMA) at 0.6230 for the fourth straight session. Markets are also factoring in a 80% probability of an RBA rate cut this month.

Technically, selling pressures could persist as the RSI and MACD keep stretching within the bearish area, casting doubt on the stochastic oscillator’s rebound. Hence, the bulls may have to work harder to flag a positive trend reversal above 0.6296-0.6330, where the 50-day SMA sits, with a breakout above 0.6400 signaling stronger upside potential.

If rejection from the 20-day SMA continues, the pair may drift lower to test the 0.6100 mark, with further losses possibly driving it to the critical 0.6000-0.5983 zone. A deeper decline could target the 0.5860 support from March 2020.

In short, while AUDUSD has rebounded from its five-year low, the path forward remains uncertain. A decisive close above 0.6330 could shift the short-term trend back in favor of the bulls.

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