- The AUD/USD outlook shows an increasing likelihood of a massive RBA rate cut.
- The trade war between China and the US escalated after Trump imposed new tariffs.
- Traders are pricing a 20% chance of a massive RBA rate cut in May.
The AUD/USD outlook shows an increasing likelihood of a massive Reserve Bank of Australia rate cut. Notably, the Australian dollar held near a five-year low on Monday as risk appetite remained poor and the outlook for Australia’s economy dimmed.
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Expectations for an RBA rate cut increased on Monday amid worries of a global economic downturn. The risk-sensitive Australian dollar plunged last week after Trump imposed reciprocal tariffs on most of the US’s trading partners. The most affected was China, which is Australia’s major trading partner.
The trade war between China and the US escalated after Trump imposed a total of over 60% tariffs on the Country. China has promised couter tariffs starting Thursday this week. These tariffs will significantly hurt China’s economy, pushing the Yuan lower. At the same time, the Aussies, a proxy for the Yuan will suffer.
The outlook for Australia’s economy has dimmed with Trump’s latest move. As a result, market participants expect the Reserve Bank of Australia to step in and support growth. Traders are pricing a 20% chance that the central bank will implement a 50-bps rate cut in May.
AUD/USD key events today
Traders are not looking forward to any key releases from the US or Australia. Therefore, they will keep digesting Trump’s policy changes.
AUD/USD technical outlook: Bears pause for breath at 0.6002
On the technical side, the AUD/USD price has halted its decline near the 0.6002 support level. Bears made a milestone move when they pushed the price below the 0.6200 key support level. Previously, AUD/USD was consolidating with no clear direction. The price kept chopping through the 30-SMA.
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However, a surge in momentum allowed bears to push the price well below the SMA. At the same time, the RSI dipped into the oversold region. A strong catalyst allowed bears to give the market direction. However, after such a steep move, they are exhausted and have stopped to rest near the 0.6002 key level.
Here, bulls might return for a brief pullback as the SMA catches up. However, as long as the price remains below the SMA, bears will likely break below 0.6002 to reach the 0.5901 support and lower.
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