The AUD/USD pair bounced back after initially dipping due to pressure above 0.7100, now settling at about 0.7065 during late Asian trading on Monday. This change came as the Australian dollar (AUD) struggled against other currencies.
Currently, the US dollar (USD) is performing better compared to the Australian dollar, which hasn’t fared as well as other currencies amidst growing concerns about US trade policy.
At the moment, the US Dollar Index (DXY), reflecting the dollar’s value against six major currencies, was down 0.3%, around 97.50.
Recently, the U.S. Supreme Court invalidated additional import tariffs, critiquing President Trump’s authority in invoking rights under the International Emergency Economic Powers Act (IEEPA) for these broad tariffs.
In response to this ruling, President Trump announced a global 15% tariff to keep pressure on trading partners regarding imports.
AUD/USD Technical Analysis
The AUD/USD has been moving within a narrow range of 0.7045 to 0.7100 for the past week. The 20-day exponential moving average (EMA) is on the rise at 0.7015, with prices above it, indicating a slight bullish inclination.
The 14-day Relative Strength Index (RSI) is found within the 40.00-60.00 band, suggesting that the momentum still leans towards Australian bulls.
If this momentum continues and the RSI ascends, it’s possible that the bulls could push towards the February 12 high of 0.7147. However, if the RSI dips back into the 40.00-60.00 range, this could signal consolidation and a potential decline in short-term momentum.
(Note: The technical analysis presented here was aided by AI tools.)
US Dollar Frequently Asked Questions
The United States Dollar (USD) serves as the official currency of the U.S. and is widely used beyond its borders, often alongside other local currencies. It’s the most traded currency globally, representing over 88% of foreign exchange transactions, with a daily trading volume averaging $6.6 trillion, according to 2022 data. Post-World War II, it replaced the British pound as the reserve currency and was initially backed by gold until the gold standard was abolished in 1971.
The primary factor influencing the USD value is the monetary policy from the Federal Reserve (Fed). The Fed aims for price stability and full employment through adjustments in interest rates. When inflation rises above the Fed’s 2% target, interest rates are hiked to support the dollar’s value. Conversely, if inflation drops or unemployment rises too high, rates might be lowered, negatively impacting the dollar.
In extreme cases, the Fed can increase the money supply through quantitative easing (QE), which boosts credit flow in a stagnant economy. This non-standard method is usually a last resort when lowering interest rates doesn’t yield needed results, as seen during the 2008 financial crisis. QE typically results in a weaker dollar.
Quantitative tightening (QT) is the opposite, where the Fed halts its bond purchases and doesn’t reinvest the principal of maturing bonds. This process usually supports the dollar’s value.
