Australian dollar shows resilience amid growing investor caution

The Australian Dollar (AUD) strengthened against the US Dollar (USD) on Thursday despite a general decline in risk appetite in the markets. This came amid concerns over new car duties imposed by the US administration.

AUD/USD initially declined following President Donald Trump's decision to impose 25 percent duties on car imports, which will take effect on April 2. However, the Australian currency then rebounded after receiving support from:

• Plans for potential duties on copper (Australia is a major copper exporter)
• Expectations that the RBA will keep rates on hold at the next meeting
• Weak US dollar on the back of lower Treasury yields

Key influencing factors

RBA monetary policy:

• February saw the first 25bp rate cut in 4 years.
• RBA Assistant Governor Sarah Hunter reiterated a cautious approach to further easing

US Dollar dynamics:

• The DXY index fell to 104.50
• Yields on 2-year and 10-year bonds were 4.0% and 4.34% respectively

US trade policy:

• Auto parts get one-month delay on new duties (until May 3, 2025)
• Fed members warned of risks to inflation and the economy

China stimulus outlook:

• Plans to raise wages and support consumption
• Possible partial duty cuts as part of the TikTok deal

Macroeconomic data:

• Australian inflation: +2.4% y/y in February
• Fiscal measures: AUD 17.1 bln tax relief
• Deficit forecast: AUD 27.6 bln (2024-25) and AUD 42.1 bln (2025-26)

Technical Analysis

AUD/USD is trading around 0.6290, facing resistance:

• Nearest level: 9-day EMA at 0.6305

Key levels:

• Up: 0.6391 (March high)
• Down: 0.6187 (March 5 low)

RSI below 50 indicates continued bearish pressure, but a break above 0.6305 could shift the balance of power in favor of the bulls.