Australian Dollar holds losses following monthly CPI

• The Australian Dollar remains tepid following the release of the monthly Consumer Price Index.
• Australia's monthly CPI rose by 2.5% YoY in January, compared to an anticipated 2.6% growth.
• Trump administration considers to tighten chip export controls on China.

The Australian Dollar (AUD) remains subdued against the US Dollar (USD) for the fourth consecutive day on Wednesday. The AUD/USD pair holds losses following the release of Australia's monthly Consumer Price Index (CPI), which rose by 2.5% year-over-year in January, compared to a 2.5% increase in December. The market forecast was for 2.6% growth in the reported period.

The AUD/USD pair faces challenges due to rising risk sentiment as US President Donald Trump said late Monday that sweeping US tariffs on imports from Canada and Mexico "will go forward" when a month-long delay on their implementation expires next week. Trump claimed that the US has "been taken advantage of" by foreign nations and reiterated his plan to impose so-called reciprocal tariffs.

According to a gated Bloomberg report early Tuesday, the Trump administration aims to tighten chip export controls on China, Australia's close trading partner. The US is considering stricter restrictions on Nvidia chip exports and may impose additional limitations on Chinese companies like SMIC and CXMT.

The People's Bank of China (PBOC) injected CNY300 billion on Tuesday via the one-year Medium-term Lending Facility (MLF), maintaining the rate at 2%. Additionally, the PBOC injected CNY318.5 billion through seven-day reverse repos at 1.50%, consistent with the prior rate. Given the close trade relationship between China and Australia, any shifts in the Chinese economy could impact the Australian Dollar.

Australian Dollar depreciates amid increased risk aversion

• The US Dollar Index (DXY), which measures the USD against six major currencies, falls to near 106.00 with 2-year and 10-year yields on US Treasury bonds declining to 4.09% and 4.28%, respectively, at the time of writing.
• Federal Reserve Bank of Chicago President Austan Goolsbee remarked on Monday that the US central bank needs greater clarity before considering interest rate cuts.
• The US Composite PMI fell to 50.4 in February, down from 52.7 in the previous month. In contrast, the Manufacturing PMI rose to 51.6 in February from 51.2 in January, surpassing the forecast of 51.5. Meanwhile, the Services PMI declined to 49.7 in February from 52.9 in January, falling short of the expected 53.0.
• US Initial Jobless Claims for the week ending February 14 rose to 219,000, exceeding the expected 215,000. Meanwhile, Continuing Jobless Claims increased to 1.869 million, slightly below the forecast of 1.87 million.
• President Trump signed a memorandum on Friday instructing the Committee on Foreign Investment in the United States (CFIUS) to limit Chinese investments in strategic sectors. Reuters cited a White House official saying that the national security memorandum seeks to encourage foreign investment while safeguarding US national security interests from potential threats posed by foreign adversaries like China.
• China released its annual policy statement for 2025 on Sunday. The statement details strategies to advance rural reforms and promote comprehensive rural revitalization. Additionally, China's state-supported developers are aggressively increasing land purchases at premium prices, driven by the government's relaxation of home price restrictions to revitalize the troubled property market.
• The Reserve Bank of Australia (RBA) lowered its Official Cash Rate (OCR) by 25 basis points to 4.10% last week--the first rate cut in four years. Reserve Bank of Australia (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 labor market's strength and clarified that future rate cuts are not guaranteed, despite market expectations.

Australian Dollar moves toward 14-day EMA barrier after breaking below 0.6350

AUD/USD trades near 0.6340 on Wednesday, breaking below the ascending channel that reflects a weakening bullish market bias. However, the 14-day Relative Strength Index (RSI) remains above 50, supporting the positive outlook is still in play.

On the upside, the AUD/USD pair tests the immediate barrier at a nine-day Exponential Moving Average (EMA) of 0.6342. A successful break above this level could improve the short-term price momentum and support the pair to test the key psychological resistance at 0.6400, with the next hurdle at the ascending channel's upper boundary around 0.6450.

The AUD/USD pair tests immediate support at the 14-day EMA of 0.6331. A decisive break below this level could cause the emergence of the bearish bias and lead the pair to test the psychological level of 0.6300.

AUD/USD: Daily Chart