Will AUD/USD continue its upward trajectory despite US trade policies?

AUD/USD makes it five weeks of gains in six

AUD/USD ended higher last week at 0.6326 (+0.32%), marking its fifth week of gains in the past six weeks.

The AUD/USD has become a beneficiary of ongoing and haphazard tariff headlines from the Trump Administration that have prompted traders to abandon the greenback due to rising fears that a trade war could spark inflation and push the US economy into recession.

Reinforcing this idea, the rise in the local currency came last week despite a 25% US tariff on imported steel and aluminium coming into effect, which impacts about $1 billion worth of Australian exports.

On Friday, the AUD/USD gained further support as risk sentiment improved ahead of the weekend, following a string of positive developments including:

• Senate Minority Leader Chuck Schumer backed a Republican-supported funding bill, easing concerns about a government shutdown
• China announced a press conference that was expected to outline measures to boost consumption
• An agreement among German parties on a new fiscal deal to increase defence spending and growth

This week, the external factors likely to influence the AUD/USD include risk sentiment, US trade policy, and interest rate meetings for the Bank of Japan (BoJ) and the Federal Reserve (Fed). Locally, the key driver for the AUD/USD this week will be Thursday's employment report for February, previewed below.

Employment report

Date: Thursday, 20 March at 11.30am AEDT

In January, the Australian economy added 44k jobs, beating market forecasts of a 20k gain. The unemployment rate edged higher to 4.1% from 4% prior as the participation rate hit a new record high of 67.3%.

Bjorn Jarvis, ABS head of labour statistics, said: "With employment rising by 44,000 people and the number of unemployed increasing by 23,000 people, the unemployment rate rose to 4.1 per cent."

The robust jobs report came two days after the Reserve Bank of Australia (RBA) cut rates for the first time since November 2020. In the accompanying statement, the RBA noted:

"Labour market conditions remain tight and tightened a little further in late 2024. Measures of labour underutilisation have declined, and business surveys suggest that labour availability remains a constraint for many employers."

This week, a stronger-than-expected jobs report will likely ensure the RBA keeps rates on hold at its April meeting and waits for softer Q1 inflation and labour market data before cutting rates in May.

The expectation for February is that the Australian economy will add 20,000 jobs, and the unemployment rate will remain at 4.1%. The Australian interest rate market starts the week pricing in 18 basis points (bp) of RBA rate cuts for May, with a cumulative 62 bp of RBA rate cuts priced for the remainder of 2025.

AU unemployment rate chart

AUD/USD technical analysis

The AUD/USD rallied 5.25% from the 0.6087 low of early February to a high of 0.6408 before falling back to a low of 0.6187 in early March. We view this price action as completing the first two legs of a three-part corrective rally.

As such, we think the AUD/USD is missing another leg higher towards the 200-day moving average (MA) at 0.6525-0.6535, where we would look for signs of topping as a precursor to another leg lower.

Aware that a sustained break above 0.6525-0.6535 would signal that the downtrend is over for the AUD/USD and that a stronger rally is underway.

AUD/USD daily chart

AUD/USD daily chart

• _{Source: TradingView. The figures stated are as of March 17, 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}