- The recent 5% rebound seen in the AUD/USD from its 3 February low is likely to be a minor corrective rebound.
- The medium-term downtrend phase of the AUD/USD in place since its 30 September 2024 high of 0.6943 remains intact.
- Watch the 0.6215 potential downside trigger level of the AUD/USD.
RBA’s less dovish stance and China’s stimulus are creating a floor
The Reserve Bank of Australia (RBA) has been reluctant to enter an easing cycle after its recent “hawkish cut” guidance on 18 February where it slashed its cash policy interest rate by 25 basis points (bps) to 4.1%.
Despite its first-interest rate reduction since November 2020, RBA Governor Bullock has poured “cold water” to temper down market expectations of further rate cuts during her press conference due to labour market tightness in Australia.
After the conclusion of China’s National People’s Congress in early March, top policymakers have signalled more upcoming stimulus measures to jumpstart domestic consumption in China which is also Australia’s largest trading partner.
Hence, further stimulus measures from China to offset potential aggressive trade tariffs from the US may increase China’s imports from Australia, in turn, creating a floor on the AUD/USD.
Weak momentum and narrowing of AU-US sovereign yield spread
Fig 1: AUD/USD medium-term trend with 2-year AU-US sovereign yield spread as of 24 Mar 2025 (Source: TradingView, click to enlarge chart)
In the lens of technical analysis, the four weeks of up move seen on the AUD/USD from its 3 February low of 0.6088 is likely a minor corrective rebound sequence within its medium-term downtrend phase that is still in progress since the 30 September 2024 swing high of 0.6943.
The daily RSI momentum indicator broke below its ascending trendline support last Thursday, 20 March, and breached below the 50 level which suggests a lack of upside momentum.
In addition, the shorter-term 2-year yield spread between Australian government bonds and US Treasury notes (also can be used as a gauge to measure the relative difference between monetary policy stances of RBA and Fed) has started to narrow again after it printed a lower high on 20 March to hit -0.25% at this time of the writing from-0.12% on 10 March (see Fig 1).
Watch the 0.6400 key medium-term pivotal resistance on the AUD/USD and a break below the 0.6215 intermediate support (also the ascending trendline from 13 January) may trigger the start of another potential impulsive down move sequence to retest 0.6120 before the next medium-term support comes in at 0.6030/0.5990.
On the other hand, a clearance above 0.6400 invalidates the bearish scenario for a recovery towards the next medium-term resistance at 0.6540 (also close to the 200-day moving average).
