The Australian Dollar (AUD) remains well bid against the US Dollar (USD) on Friday, as US President Donald Trump’s softer stance on trade with China eases risk sentiment. The Aussie is showing resilience even as the Greenback strengthens, supported by Australia’s close trade ties with China.
At the time of writing, AUD/USD is holding firm around the 0.6500 psychological level, rebounding from an intraday low of 0.6443. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is recovering modestly from two-week lows, trading around 98.45, but remains on track for weekly losses.
US President Donald Trump said on Friday that his plan to impose 100% tariffs on Chinese imports “is not sustainable,” signaling a willingness to ease tensions between the world’s two largest economies. He also confirmed plans to meet Chinese President Xi Jinping at the upcoming APEC Summit in South Korea.
From a technical perspective, AUD/USD broke below the neckline of a Head and Shoulders pattern last week, confirming a bearish continuation setup. Since then, the pair has traded in a relatively narrow range between 0.6450 and 0.6520, reflecting consolidation after the breakdown.
Immediate support is seen near the weekly low around 0.6440. A decisive move below this area could expose the multi-month horizontal support near 0.6400, which represents the next key downside target.
On the upside, initial resistance lies at the 0.6500 handle, followed by the 50-day Simple Moving Average (SMA) near 0.6550, which also aligns with the former neckline of the Head and Shoulders pattern. Only a break and daily close above this confluence zone would negate the bearish setup and shift the short-term structure back to bullish.
Momentum indicators remain slightly bearish, with the Relative Strength Index (RSI) hovering near 42, suggesting that while the downside pressure has eased, recovery attempts may face resistance unless broader risk sentiment improves.
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.
