Australian Dollar depreciates following employment data, China's policy decision

• The Australian Dollar depreciates due to the latest Trump tariffs and cautious FOMC Minutes.
• Australia's Unemployment Rate increased to 4.1% in January from 4.0% in December, as expected.
• President Trump has confirmed plans to impose a 25% tariff on imports of automobiles, semiconductors, and pharmaceutical products.

The Australian Dollar (AUD) extends its losses against the US Dollar (USD) following the release of domestic employment data and China's interest rate decision on Thursday. However, the AUD/USD pair faced headwinds as risk aversion increased due to concerns over the latest tariffs from US President Donald Trump and a cautious tone in the Federal Open Market Committee (FOMC) Minutes from January's policy meeting.

On Thursday, the Australian Bureau of Statistics (ABS) reported that Australia's seasonally adjusted Unemployment Rate rose to 4.1% in January from 4.0% in December, aligning with market expectations. Additionally, Employment Change came in at 44K for January, down from a revised 60K in December (previously 56.3K), but still exceeding the consensus forecast of 20K.

The People's Bank of China (PBOC) opted to keep its Loan Prime Rates (LPRs) unchanged, with the one-year and five-year rates remaining at 3.10% and 3.60%, respectively.

The AUD faced downward pressure after the Reserve Bank of Australia (RBA) lowered its Official Cash Rate (OCR) by 25 basis points to 4.10% on Tuesday--the first rate cut in four years. RBA Governor Michele Bullock acknowledged the impact of high interest rates but cautioned that it was too soon to declare victory over inflation. She also emphasized the strength of the labor market and clarified that future rate cuts are not guaranteed, despite market expectations.

Australian Dollar declines due to Trump tariffs, FOMC Minutes

• The US Dollar Index (DXY), which measures the USD against six major currencies, hovers around 107.00. Meanwhile, US Treasury yields stand at 4.26% for the 2-year note and 4.52% for the 10-year note at the time of writing.
• The latest Federal Open Market Committee (FOMC) Meeting Minutes reaffirmed the decision to keep interest rates unchanged in January. Policymakers emphasized the need for more time to assess economic activity, labor market trends, and inflation before considering any rate adjustments. The committee also agreed that clear signs of declining inflation are necessary before implementing rate cuts.
• President Trump has confirmed that a 25% tariff on pharmaceutical and semiconductor imports will take effect in April. Additionally, he reaffirmed that auto tariffs will remain at 25%, further escalating global trade tensions.
• "So far, the dollar has tracked the path it had during the previous Trump administration...and we can pretty much agree that Trump is doing exactly what he said," said Chester Ntonifor, chief FX and global fixed income strategist, at BCA Research in Montreal.
• Federal Reserve Bank of Chicago President Austan Goolsbee stated late Wednesday that while inflation has declined, it remains elevated. Goolsbee emphasized that interest rates can be lowered further once inflation falls to a more acceptable level.
• San Francisco Fed President Mary Daly said on Tuesday that prospects of further rate cuts in 2025 remain uncertain despite an overall positive lean to US economic factors. Philadelphia Fed President Patrick Harker emphasized support for maintaining a steady interest rate policy, noting that inflation has remained elevated and persistent in recent months.

Technical Analysis: Australian Dollar tests nine-day EMA support

The AUD/USD pair hovers around 0.6330 on Thursday, trading within an ascending channel that suggests a bullish market sentiment. The 14-day Relative Strength Index (RSI) remains above 50, reinforcing the positive outlook.

On the upside, the AUD/USD pair could challenge the key psychological resistance at 0.6400, which aligns with the channel's upper boundary at 0.6410.

Immediate support is found at the nine-day Exponential Moving Average (EMA) of 0.6326, followed by the 14-day EMA at 0.6311. A stronger support zone lies near the channel's lower boundary at 0.6300.

AUD/USD: Daily Chart