The Australian Dollar (AUD) remains under pressure against the US Dollar (USD) on Wednesday as it faces multiple headwinds, particularly from new trade developments. The AUD/USD currency pair is weighed down by US President Donald Trump’s announcement that his administration is contemplating a 10% tariff on Chinese imports, set to take effect from February 1. According to Reuters, the tariff consideration stems from concerns about fentanyl trafficking from China to Mexico and Canada.
Trump also hinted at further tariff measures, stating, “If we make a TikTok deal and China doesn’t approve it, we could maybe put tariffs on China.” This comment follows his decision to extend the enforcement of a TikTok ban by 75 days. With Australia’s economy heavily tied to China, any significant shifts in China’s trade relations could have a substantial impact on Australian markets.
Meanwhile, Chinese Vice Premier Ding Xuexiang warned of the consequences of a potential trade war, emphasizing that “there are no winners” in such conflicts, as China braces for possible tariffs under the new US administration, as reported by CNBC.
On the domestic front, Australia’s S&P/ASX 200 Index rose to approximately 8,450 on Wednesday, marking its highest point in nearly seven weeks. The upward movement was fueled by a positive market response to Trump’s decision to delay tariff impositions, offering some relief to global markets.
In the foreign exchange market, AUD/USD hovers near 0.6270. A closer look at the daily chart reveals that the pair is trading within an ascending channel, which could indicate a potential bullish shift. The 14-day Relative Strength Index (RSI) stands slightly above the neutral 50 level, reinforcing the market’s optimistic sentiment.
If the pair moves upward, the next key resistance level is at 0.6300, followed by the upper boundary of the channel near 0.6320. On the downside, initial support is seen around the nine-day Exponential Moving Average (EMA) at 0.6235, with further support at the 14-day EMA at 0.6231. A stronger support zone lies at the lower boundary of the ascending channel near 0.6210, followed by the psychological 0.6200 level.
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