AUD/USD Faces Key Resistance as US Dollar Gains on Trade Optimism

The AUD/USD is trading at 0.6388 in the European session after hitting an intra-day low of 0.6382. The pair has come under pressure as the US Dollar gains momentum after the trade deal between the US and China was announced over the weekend.

The deal, announced in Geneva, Switzerland, includes the US suspending 24% of its tariffs on Chinese goods for 90 days.

US Treasury Secretary Scott Bessent called this a big step towards easing trade tensions and a positive for the US Dollar.

US Dollar Rises on Trade Optimism and Fed Pause

The US Dollar Index (DXY) is strong at 101.60 after the trade deal news. US Commerce Secretary Howard Lutnick said the US will keep a 10% baseline tariff on other countries.

US Trade Representative Jamieson Greer said the previous embargo strategy didn’t work and the 90 day pause is a big step for global trade despite the fentanyl issue.

In addition to trade optimism, traders are waiting for US inflation data on Tuesday and retail sales and producer price index later in the week. The Fed’s decision to hold rates steady at 4.25%-4.50% also supports the dollar but concerns about inflation and unemployment still weigh on the market.

Australian Economy Weakness Weighs on AUD

On the Australian side, the outlook is less positive with weak data adding to the AUD’s downside risk. The Ai Group Industry Index showed contraction in April for the 33rd month in a row.

This has led to expectations of a 25bps RBA rate cut to 3.85% in the next meeting.

Traders are also waiting for key Australian data including Westpac Consumer Confidence for May and NAB Business Conditions for April to get more insights into the Australian economy.

Technical Analysis – Bearish Setup at Key Resistance

The AUD/USD is at key resistance at 0.6415 which is also the 50 day EMA, a level that has acted as dynamic resistance in recent times.

The broader trend is down and the trendline is also down, selling pressure will continue. The MACD is also bearish with the histogram below the zero line, indicating increasing downside momentum.

Trade

• Entry: Sell at 0.6415 as long as the price is below the 50 EMA.

• Take Profit (TP): Target 0.6364 and 0.6343 if the bearish momentum accelerates.

• Stop Loss (SL): Above the trendline at 0.6436 to limit the upside.

• Risk/Reward: 2:1, in line with the bearish trend.

With the AUD weak and the US Dollar strong, the path of least resistance is down. Watch out for upcoming data for more clues on the AUD.