Australian Dollar collapses below 0.6050 as markets brace for RBA rate cuts
- AUD/USD tumbles toward the 0.6050 region during Friday’s American session, marking a sharp intraday plunge.
- Trump’s aggressive tariffs spark fears of slower global growth and inflation; Fed Chair Powell warns of broader economic impact.
- Technical indicators flash strong bearish momentum; resistance seen near 0.6200 while the pair tests multi-year lows.
The AUD/USD pair crumbled below key psychological support during Friday’s American session, sliding toward the 0.6050 region and marking its lowest level in five years. The steep drop comes in the wake of a stronger-than-anticipated US Nonfarm Payrolls (NFP) report, which added to a broader surge in the Greenback. However, the dominant catalyst behind the Aussie’s collapse stems from a new wave of US tariffs announced by President Donald Trump, sparking global growth concerns and triggering speculation that the Reserve Bank of Australia (RBA) may respond with a series of aggressive rate cuts this year. From a technical standpoint, the pair is flashing intense bearish momentum, with the RSI now well into oversold territory and the MACD printing a fresh red bar.
Daily digest market movers: Trump tariffs and RBA bets crush Aussie
- The Australian Dollar (AUD) faced a brutal sell-off, dropping below the 0.6050 zone as investors rapidly repriced RBA rate expectations in response to Trump's sweeping new tariff package.
- Federal Reserve (Fed) Chair Powell, speaking at a business journalism event, acknowledged that the scale of the tariff campaign may have a more persistent effect on inflation and growth than initially projected.
- Powell stressed the Fed’s flexibility, noting that while inflation is cooling gradually, the economic impact of tariffs remains highly uncertain, prompting a wait-and-see stance.
- Despite March’s robust US jobs report, with payrolls beating forecasts and the unemployment rate ticking up slightly, Powell highlighted deteriorating business sentiment tied to trade policy.
- Markets now expect the RBA to potentially deliver back-to-back rate cuts in the next few meetings, with some banks even forecasting a 50 bps move in May.
- China’s retaliatory stance further compounds the pressure on the Aussie, as Australia's export-driven economy remains deeply tied to Chinese demand.
- The US Dollar advanced broadly following the NFP print and Powell’s comments, strengthening further against high-beta currencies like the AUD.
Technical analysis
Friday’s carnage leaves the AUD/USD pair deep in bearish territory, with price action collapsing near the lower end of its daily range and breaching significant multi-year support zones. The Moving Average Convergence Divergence (MACD) continues to print new red bars, reinforcing downside momentum, while the Relative Strength Index (RSI) has fallen to the 27 region, confirming extreme oversold conditions.
Although the Stochastic oscillator appears neutral, the persistent sell-off is further validated by the Bear/Bull Power indicator flashing red and a sharp divergence across moving averages. All short and long-term moving averages—the 10-day EMA, 20-day, 100-day, and 200-day Simple Moving Averages—continue to point downward, underlining the prevailing downtrend.
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.