Australian Dollar Climbs Toward 0.6400 as Chinese Growth and Risk Sentiment Offset Trade Tensions

The Australian Dollar (AUD) gained ground on Monday, moving towards the 0.6400 mark during the American session. The rebound was fueled by improving risk sentiment and a weaker US Dollar (USD), which helped AUD/USD recover from recent losses. Optimism surrounding Chinese GDP growth, which grew by 5.4% year-over-year in Q1, also provided support.

Despite these positive developments, the rebound remains fragile, as ongoing US-China trade tensions and the Aussie’s role as a proxy for Chinese demand pose risks to further gains.

AUD Sensitive to US-China Tensions, While Gold Surges Amid Geopolitical and Economic Uncertainty

ING strategists highlighted that the AUD remains sensitive to the US-China trade dispute. While the Reserve Bank of Australia (RBA) is expected to cut interest rates in May, the primary driver for AUD remains developments in global trade and commodities. The Australian economy is also under pressure from global decoupling trends. Despite a more favorable risk environment, the AUD’s upside potential is limited by the ongoing trade conflict and concerns about the global economy.

Gold prices surged to a new record, nearing $3,319 per ounce, driven by safe-haven demand and lower Treasury yields. The price spike coincided with a series of geopolitical tensions, including a probe by President Trump into possible tariffs on critical mineral imports, citing national security concerns.

China retaliated by implementing new export licenses for rare earths, increasing economic pressure on key US sectors. These developments further underscored the fragile economic environment, which supports gold as a safe investment.

Chinese GDP Growth Boosts AUD as Technical Outlook Shows Bullish Momentum, Resistance Looms

Chinese Q1 GDP growth of 5.4% year-over-year came in better than expected, boosting optimism around risk assets, including the Australian Dollar. Additionally, March activity indicators also exceeded forecasts, suggesting a more resilient Chinese economy than initially anticipated. Chinese officials have also shown a willingness to resume trade talks with the US, provided there is a more respectful tone from Washington. Despite this, the overall environment remains volatile, with trade tensions continuing to influence market sentiment.

From a technical perspective, the AUD/USD pair shows a bullish outlook, having rallied into the 0.6400 region. Indicators such as the Moving Average Convergence Divergence (MACD) and the Relative Strength Index (RSI) suggest upward momentum, with several key moving averages pointing higher. However, resistance remains near the 0.6480 level, marked by the 200-day Simple Moving Average (SMA), which could cap further gains. Immediate support is found around 0.6325 and 0.6288, with resistance at 0.6412 and 0.6479, indicating a mixed but cautiously optimistic technical view.