Australian Dollar steadies near 0.6270 after RBA decision, tariffs in focus
- AUD/USD rose toward the 0.6270 zone on Tuesday amid cautious recovery following RBA’s status quo decision.
- RBA held rates unchanged at 4.10% and avoided forward guidance, while investors await Trump’s tariff announcement.
- Despite modest gains, key indicators remain bearish; resistance looms near short-term moving averages.
The AUD/USD pair hovered around the 0.6270 region during Tuesday’s American session, posting a moderate rebound following the Reserve Bank of Australia's (RBA) policy decision. The central bank, as widely expected, held its Official Cash Rate steady at 4.10% while opting not to offer explicit guidance on future moves. Despite the initial lift in the Aussie, the pair remains capped by technical resistance zones and broader market caution, especially as traders brace for United States (US) President Trump’s long-awaited tariff announcement. From a technical perspective, the Moving Average Convergence Divergence (MACD) flashes bearish continuation, while the Relative Strength Index (RSI), although rising, remains below the neutral line.
Daily digest market movers: AUD steadies after RBA, tariff risks cap gains
- The Australian Dollar pared back early-week losses and moved toward the 0.6270 region, attempting to stabilize after two days of declines.
- The RBA kept its benchmark rate unchanged and struck a neutral tone, with Governor Michele Bullock confirming the board hasn't committed to a May move.
- Risk sentiment remains fragile ahead of “Liberation Day,” when the White House is expected to unveil a broad tariff package targeting key trade partners.
- Fresh tariff threats weigh on global growth sentiment and, by extension, commodity-linked currencies like the Aussie.
- A slight improvement in China’s Caixin Manufacturing PMI added some short-term support to AUD/USD.
- Federal Reserve (Fed) policy remains in focus, with markets ramping up bets on June rate cuts after soft ISM Manufacturing and JOLTS data.
- According to CFTC data, speculative bearish bets on AUD have reached multi-week highs, highlighting market skepticism around the Aussie’s outlook.
Technical analysis
From a technical standpoint, the AUD/USD pair recovery remains constrained by a series of resistance levels, despite posting intraday gains. The MACD histogram continues to show fresh red bars, indicating lingering downside momentum, while the 14-period Relative Strength Index has bounced but still trades below the 50 threshold, signaling weak bullish strength.
The Commodity Channel Index improved but remains in negative territory, suggesting only a tentative recovery. The pair remains trapped in the middle of the daily range between 0.6231 and 0.6282, unable to break out decisively. Several key moving averages—the 10-day EMA, 20-day, 100-day, and 200-day SMAs—are all aligned to the downside, underscoring the persistent bearish bias.
Immediate support is noted around 0.6267, while upside resistance clusters near 0.6289 and 0.6290 and extends to 0.6292. Without a meaningful breakout, AUD/USD is likely to remain directionless in the near term, especially with traders holding back ahead of Wednesday’s US tariff announcement.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.