The currency market experienced notable shifts on Friday as the US Dollar gained momentum. The EUR/USD pair declined to fresh daily lows, settling at the 1.0370 zone, driven by a resurgence in the Greenback's upward momentum. Meanwhile, the AUD/USD hovered around 0.6215 amid market speculation of an impending rate cut by the Reserve Bank of Australia (RBA) and concerns over China's economic slowdown. These movements occurred against a backdrop of fresh tariff threats from US President Donald Trump, further impacting global currency dynamics.
The Relative Strength Index (RSI) for the EUR/USD indicates a level of 47, suggesting that while it remains in negative territory, there is a slight recovery underway. The US Dollar's strength is underpinned by data releases, including the US Core Personal Consumption Expenditures (PCE) Price Index, which rose by 0.2% month-on-month as anticipated. Additionally, Fed officials, including Governor Michelle Bowman, highlighted persistent inflation risks, reinforcing expectations that rate cuts could be delayed, thereby supporting the Greenback.
In Australia, the AUD/USD pair trades slightly higher at 0.6215 during the Asian session but remains under pressure. Market participants are anticipating a dovish shift from the RBA in February, with traders fully pricing in a 25-basis-point rate cut at the upcoming meeting. This sentiment is compounded by lower-than-expected Q4 inflation figures, where the trimmed mean Consumer Price Index (CPI) eased to 3.2%, below the RBA's previous forecast of 3.4%. These factors contribute to downside risks for the Australian Dollar.
The Australian Dollar also faces challenges from China's economic slowdown and tariff threats from President Trump. Trump recently reiterated plans to impose tariffs on Mexico, Canada, and China, which has fueled safe-haven demand for the US Dollar. His comments on TruthSocial emphasized a commitment to preventing BRICS nations from creating a new currency to replace the US Dollar. Trump warned of imposing 100% tariffs on these countries should they attempt such moves.
In terms of technical analysis, key support for AUD/USD is identified at 0.6200, with any breach potentially opening the door to further declines towards 0.6170. Immediate resistance is observed at 0.6230, aligning with the 20-day Simple Moving Average (SMA). These levels will be crucial for traders as they navigate market conditions influenced by global economic and political developments.