Australian Dollar struggles as Trump reiterates to impose reciprocal, sectoral tariffs

• The Australian Dollar faces challenges as Trump says to impose reciprocal, sectoral tariffs on April 2.
• China's Retail Sales rose 4% YoY in January-February, up from December’s 3.7% increase.
• Market expectations suggest that the Fed will keep its current policy stance unchanged on Wednesday.

The Australian Dollar (AUD) holds losses against the US Dollar (USD) after US President Donald Trump stated early Monday that he "will impose reciprocal and sectoral tariffs on April 2," with no exemptions for steel and aluminum. Reciprocal tariffs on certain countries will be implemented alongside auto duties. Additionally, an announcement regarding Russia-Ukraine talks may come on Tuesday.

However, the AUD/USD pair gained ground following the release of China’s economic data. Traders will likely observe the US Retail Sales data scheduled to be released later in the North American session.

China's retail sales grew by 4.0% year-over-year in January-February, improving from December’s 3.7% increase. Meanwhile, industrial production rose 5.9% YoY during the same period, exceeding the 5.3% forecast but slightly lower than the previous reading of 6.2%.

The AUD could gain ground as China unveiled a special action plan over the weekend to revive consumption, lifting market sentiment across the region. The plan includes measures to increase wages, boost household spending, and stabilize stock and real estate markets. Any positive developments surrounding the Chinese stimulus plan could boost the Australian Dollar, as China is a major trading partner to Australia.

The AUD/USD pair may receive support from improving risk sentiment amid reports of a potential ceasefire discussion between US President Donald Trump and Russian President Vladimir Putin this week. Trump’s envoy, Steve Witkoff, stated on Sunday that he expects the two leaders to speak, adding that Putin “accepts the philosophy” of Trump’s ceasefire and peace terms, according to The Guardian.

Australian Dollar could gain ground amid improved risk sentiment

• The US Dollar Index (DXY), which measures the USD against six major currencies, is trading around 103.80 at the time of writing. The Greenback faced headwinds after the University of Michigan (UoM) reported a decline in its preliminary Consumer Sentiment Index for March on Friday, falling to 57.9—the lowest since November 2022—from the previous reading of 64.7. This figure also came in below the consensus estimate of 63.1. Meanwhile, the UoM five-year Consumer Inflation Expectation jumped to 3.9% in March, compared to 3.5% in February.
• Markets widely anticipate that the Federal Reserve (Fed) will maintain its current policy stance when it concludes its two-day meeting on Wednesday. According to the CME FedWatch tool, traders have priced in nearly a 75% probability of a quarter-point rate cut by June.
• On Sunday, the Houthis declared that they had launched an assault involving 18 ballistic and cruise missiles, along with drones, aimed at the USS Harry S. Truman aircraft carrier and its escorting warships in the northern Red Sea. Meanwhile, the US defense secretary stated that the United States would continue striking Yemen's Houthis until they cease attacks on shipping, as the Iran-aligned group vowed to escalate in retaliation for deadly US strikes the previous day.
• US Treasury Secretary Scott Bessent said late Sunday that he was not concerned about the stock market despite multiple declines triggered by Trump's tariff threats. "I've been in the investment business for 35 years, and I can tell you that corrections are healthy. They're normal. What's not healthy is a market that only moves straight up," Bessent stated.
• US President Donald Trump’s decision to uphold a 25% tariff on Australian aluminum and steel exports, valued at nearly $1 billion. This move adds strain to Australia’s trade outlook, impacting major exports.
• Australian Prime Minister Anthony Albanese confirmed that Australia will not impose reciprocal tariffs on the US, emphasizing that retaliatory measures would only raise costs for Australian consumers and fuel inflation.

Technical Analysis: Australian Dollar maintains position above 0.6300, nine-day EMA

The AUD/USD pair is hovering around 0.6340 on Monday, maintaining a bullish outlook after reclaiming its position within the ascending channel on the daily chart. The 14-day Relative Strength Index (RSI) has also rebounded above 50, further supporting the positive momentum.

Immediate support is seen at the nine-day Exponential Moving Average (EMA) of 0.6309, followed by the 50-day EMA at 0.6306 and the lower boundary of the ascending channel. A decisive break below this critical support zone could weaken the bullish bias, exposing the AUD/USD pair to downward pressure toward the six-week low of 0.6187, recorded on March 5.

On the upside, the AUD/USD pair may attempt to retest the three-month high of 0.6408, last seen on February 21. A breakout above this level would reinforce the bullish bias, potentially driving the pair toward the ascending channel’s upper boundary near 0.6470.

AUD/USD: Daily Chart