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The AUD/USD pair recovered slightly to $0.6050 during the early Tuesday Asian session. However, the US Dollar remains stronger amid rising fears of a US recession triggered by President Trump’s sweeping tariffs on key trading partners. This risk-off sentiment has added pressure on the Australian Dollar as investors seek safer assets.
According to the CME FedWatch tool, markets now see a 65% chance of a Fed rate cut in May. Meanwhile, the RBA is expected to cut rates by 25 basis points in May, with a 50 bps cut also possible. The prospect of aggressive easing from both central banks keeps AUD/USD under pressure. China-related risks add a slight downside bias for the Aussie.
On Friday, China announced a 34% counter-tariff on US imports, effective Thursday, in retaliation to Trump tariffs. This escalation in the trade war between the US and China threatens to hurt Australia’s economy, as China is Australia’s largest trading partner. The rising trade tensions are likely to weigh further on the Australian Dollar, which often acts as a proxy for China-related sentiment.
AUD/USD Technical Analysis – Volatility
The 4-hour chart for AUD/USD shows that the pair has reached strong support at $0.5950 and continues to consolidate within a wide range around this level. It failed to break above $0.6450, the upper boundary of an ascending broadening wedge pattern, which indicates heightened volatility. A strong rebound is likely from the $0.5950 area, as this level remains a key long-term support zone.
