Australian Dollar (AUD) slumped for the third consecutive trading session on Monday, weighed down by intensifying global trade tensions after former US President Donald Trump warned of imposing an additional 10% tariff on BRICS-aligned countries. The AUDUSD pair traded lower, reflecting investor nervousness ahead of key central bank decisions and fresh tariff escalations.
The US Dollar (USD), on the other hand, strengthened, bolstered by a strong US labor market report and growing expectations of sustained economic resilience. As of early Monday, the US Dollar Index (DXY) hovered around 97.00, adding further downside pressure on the Aussie.
Trump’s Tariff Threat Rattles BRICS and Trade-Linked Currencies.
Markets interpreted this as a direct shot at major emerging economies including China, India, Brazil, Russia, and South Africa key members of the BRICS bloc. Given Australia’s close trade and commodity exposure to China, the warning set off fresh alarms in the Australian Dollar market.
The US Commerce and Treasury Secretaries added fuel to the fire. Scott Bessent confirmed the possibility of resetting tariffs to April 2 levels starting August 1. Howard Lutnick emphasized that up to 15 letters may be issued by Trump this week, giving countries until July 9 to secure trade terms and avert the penalties.
China Reroutes Exports Amid US Pressure, Raising Australian Dollar Risk
A report by The Financial Times added further strain on sentiment. It showed a dramatic shift in China’s export behavior:
- Direct exports from China to the US fell 43% in May, while
- Exports to Southeast Asia rose 15%, and
- Shipments to the European Union (EU) jumped 12%.
This trend indicates China’s strategic efforts to bypass US tariffs by re-routing goods through third countries. However, the US-Vietnam trade agreement now includes a 40% tariff on transshipped goods, limiting China’s ability to evade penalties.
For Australia, which relies heavily on Chinese demand for commodities like iron ore and coal, a slowdown or realignment in Chinese exports could have a chilling effect on its own trade surplus and growth forecasts.
Australian Data: A Mixed Bag Offers Little Relief
Australia’s domestic data provided only marginal support. According to the latest figures:
ANZ Job Advertisements rose 1.8% in June, following a 1.2% drop in May.
This rebound is encouraging, suggesting underlying labor market resilience, but it lacked the strength to offset larger trade and geopolitical concerns.
Meanwhile, Australia’s trade surplus shrank sharply, coming in at just 2.24 billion AUD in May, missing the expected 5.1 billion Australain Dollar.
- Exports declined by 2.7%
- Imports surged by 3.8%
This sharp reversal highlights the vulnerability of Australia’s external sector, particularly when global trade tensions flare up.
All Eyes on RBA: Rate Cut Likely, But Uncertainty Looms
Markets are now laser-focused on Tuesday’s Reserve Bank of Australia (RBA) policy decision. According to a recent Reuters poll:
31 out of 37 economists expect a 25 bps rate cut
Median forecast sees the RBA cash rate falling to 3.10% by year-end, down from 3.35% previously
Rising global trade risks, subdued domestic demand, and weakening trade balances may prompt the RBA to shift toward a more accommodative stance, even if recent labor and inflation data haven’t been overtly soft.
Still, policymakers are walking a tightrope, balancing rate cuts against sticky services inflation and fragile housing demand.
US Labor Market: Mixed but Mostly Strong
Across the Pacific, the US economy continues to outperform expectations in the labor market:
- Nonfarm Payrolls (NFP): +147,000 jobs in June (vs. 110,000 expected)
- Unemployment Rate: Fell to 4.1% from 4.2%
- Weekly Jobless Claims: Dropped to 233,000 from 237,000
These figures show a robust US employment landscape despite recent moderation in private sector hiring.
However, the ADP Employment Change fell for the first time in two years, with a 33,000 job loss, missing consensus forecasts of a 95,000 gain.
This divergence could signal slowing momentum ahead but, for now, supports USD strength against risk-sensitive currencies like the Australian Dollar.
AUDUSD Technical Outlook: Bearish Bias Intact
Technically, the AUDUSD pair remains under pressure, testing key support near the 0.6630–0.6650 region. A decisive break below this range could open the door toward the 0.6580 level.
Key Resistance Levels:
0.6700 – Near-term psychological barrier
0.6765 – 50-day SMA
Key Support Levels:
0.6630 – Immediate support
0.6580 – 2-month low
0.6530 – March low
Bearish momentum remains intact as long as price action stays below the 50-day moving average and as geopolitical uncertainty looms.
Conclusion:Markets Brace for RBA and More Tariff Drama
The week ahead is packed with market-moving catalysts:
RBA Policy Decision (Tuesday) – Expected rate cut could send AUD lower
US CPI Data (Wednesday) – Inflation print will determine Fed policy trajectory
Trump’s Tariff Letters (Ongoing) – Deadline set for July 9
If global risk aversion continues to rise and the RBA confirms a dovish stance, the Australian Dollar could face a deeper selloff. On the flip side, signs of de-escalation in US-China or BRICS trade talks could help stabilize the pair.
Disclaimer: This blog is for informational purposes only and does not constitute financial advice. Always conduct your own research and consult a professional advisor before making investment decisions.
[sc_fs_multi_faq headline-0=”h2″ question-0=”Why did the Australian Dollar fall today?” answer-0=”The AUD fell due to US President Trump’s threat of an additional 10% tariff on BRICS-aligned countries. Concerns over global trade and China’s export dynamics impacted Australia’s trade outlook.” image-0=”” headline-1=”h2″ question-1=”What is the RBA expected to do this week?” answer-1=”The Reserve Bank of Australia is widely expected to cut interest rates by 25 basis points to address slowing trade, inflation risks, and global economic headwinds.” image-1=”” headline-2=”h2″ question-2=”What are the key levels to watch in AUD/USD?” answer-2=”Support lies at 0.6630 and 0.6580, while resistance is seen around 0.6700 and 0.6765. A break below key support could extend losses toward multi-month lows.” image-2=”” count=”3″ html=”true” css_class=””]
