AUD/USD Price Forecast: Falls back as US Dollar refreshes weekly high

• AUD/USD gives up some intraday gains as the US Dollar posts a fresh weekly high amid Donald Trump's tariff fears.
• Donald Trump is poised to impose 25% tariffs on Canada and Mexico, and 100% on BRICS.
• Investors expect the RBA to pivot to a policy-easing stance from February.

The AUD/USD pair surrenders a majority of intraday gains after facing selling pressure above 0.6230 in Friday's European session but is still almost 0.2% higher at the press time. The Aussie pair retreats as the US Dollar (USD) strengthens amid deepening risks of a global trade war, with United States (US) President Donald Trump threatening to impose hefty tariffs on BRICS, and other North American nations.

The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, posts a fresh weekly high near 108.35.

Market participants expect higher tariffs would result in an acceleration in inflationary pressures on the assumption that the scenario will boost production domestically, which will increase labor demand and, eventually, wage growth. Such a scenario will allow the Federal Reserve (Fed) to hold interest rates at their current levels for longer.

Meanwhile, investors have underpinned the Australian Dollar (AUD) against the US Dollar even though traders have fully priced in the fact that the Reserve Bank of Australia (RBA) will start reducing interest rates from the policy meeting in February. Analysts at ANZ expect that a "sharper-than-expected" slowdown in inflation would provide the RBA with enough confidence to lower its Official Cash Rate by 25 basis points (bps) at its next meeting.

AUD/USD corrects to near 0.6200 after failing to extend the 11-day recovery above 0.6330 from an over-four-year low of 0.6130. The pair rebounded after a divergence in momentum and price action. The 14-period Relative Strength Index (RSI) formed a higher low, while the pair made lower lows on a four-hour timeframe.

The asset has also returned below the 50-period Exponential Moving Average (EMA), which trades around 0.6246.

Going forward, the pair would resume its downside journey if it fails to hold the January 13 low of 0.6130. This will push it lower to the round-level support of 0.6100 and the April 2020 low of 0.5990.

On the flip side, a sustenance move above the January 13 high of 0.6330 will open doors to the round-level resistance of 0.6400 and the December 5 high of 0.6456

AUD/USD four-hour chart