Australian Dollar appreciates amid potential easing of global trade tensions

• The Australian Dollar edges higher following comments from US President Donald Trump, signaling openness to trade negotiations.
• The AUD remains vulnerable as Trump threatened a further 50% tariff on Chinese imports, raising concerns over trade tensions.
• The US Dollar may find support as a higher 10-year Treasury yield reflects stronger investor demand for higher returns.

The Australian Dollar (AUD) halts its three-day losing streak against the US Dollar (USD) on Wednesday, supported by comments from US President Donald Trump suggesting a willingness to negotiate with trade partners. Trump's remarks boosted optimism for a potential easing of global trade tensions.

US Treasury Secretary Scott Bessent revealed that nearly 70 countries have reached out to the White House seeking to negotiate tariffs. Despite this, market volatility is expected to remain elevated after Trump threatened to impose an additional 50% tariff on Chinese imports if Beijing does not reduce its duties on US goods.

The AUD remained under pressure amid persistent US-China trade tensions, particularly as Australia maintains strong economic ties with China. Beijing denounced Trump's latest threat as "blackmail" and vowed to safeguard its interests.

Australia's economic outlook remains fragile, with both business and consumer confidence subdued. The soft data has reinforced expectations of a more dovish stance from the Reserve Bank of Australia (RBA), with markets now pricing in up to 100 basis points in rate cuts this year--starting in May, with further reductions likely in July and August.

Australian Dollar could struggle as escalating trade tensions fuel rising uncertainty

• The US Dollar Index (DXY), which measures the USD against a basket of six major currencies, depreciates below 102.50. However, the downside appears limited as the US 10-year Treasury yield climbed to 4.36% at the time of writing. The rise in yields reflects heightened investor demand for returns amid growing uncertainty fueled by escalating global trade tensions.
• Traders will likely watch this week's inflation data, which is expected to heavily influence the outlook for interest rate cuts in the coming months. Additionally, investors await the release of the FOMC Meeting Minutes later on Wednesday for further policy clues.
• On Tuesday, US Customs and Border Protection announced readiness to begin collecting country-specific tariffs from 86 trade partners. President Trump stated he was not considering pausing his broad tariff plans despite outreach from several countries seeking exemptions, although he signaled some openness to negotiations.
• Chicago Fed President Austan Goolsbee stressed the importance of thoroughly evaluating economic data before deciding on future monetary policy steps.
• According to the CME FedWatch Tool, traders are increasingly betting on a 25-basis-point rate cut as early as May. Nonetheless, the broader market continues to view a July cut as more likely, with expectations for total rate reductions exceeding 100 basis points by year-end.
• In Australia, consumer sentiment weakened notably, with the Westpac Consumer Confidence Index falling 6% in April after a 4% gain in March--the first decline since January.
• Australia's business sentiment also softened as the NAB Business Confidence Index slipped to -3 in March from a revised -2, its lowest reading since November. Business conditions remained relatively steady but slightly below average, improving modestly from 3 to 4.

Australian Dollar rebounds from lowest level since March 2020 near 0.5900 region

The AUD/USD pair is trading near 0.5980 on Wednesday, with technical indicators on the daily chart pointing to a sustained bearish bias, as the pair remains below the nine-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) sits below 30, suggesting the potential for a short-term corrective rebound.

Immediate support is seen at the descending trendline near 0.5914--marking the lowest level since March 2020.

On the upside, initial resistance lies at the nine-day EMA around 0.6113, followed by the 50-day EMA at 0.6259. A stronger recovery could be seen in the pair testing the four-month high at 0.6408.

AUD/USD: Daily Chart