AUD/USD Falls Sharply: Will the Downtrend Continue as RBA Prepares to Cut Rates?

Forex

Summary:

On April 29, 2025, the AUD/USD exchange rate fell sharply to 0.6420, under pressure from expectations that the Reserve Bank of Australia (RBA) will cut interest rates in May. At the same time, the weakening of the USD and global trade tensions are affecting the market....

SELL AUDUSD

Close Time

CLOSED

0.64000

Entry Price

0.62500

0.64600

0.66526 +0.00006 +0.01%

4.6

Pips

Profit

0.62500

0.63954

Exit Price

0.64000

Entry Price

0.64600

Overview

The AUD/USD pair is currently trading around 0.6450, down sharply from a high of 0.6941 in February 2025. The weakening USD and expectations of a rate cut by the RBA are putting downward pressure on the pair.

Market psychology

Current market sentiment reflects concerns about the global economic outlook and the divergence in monetary policy between the US and Australia. The Fear Greed Index shows increased concern, with a high fear ratio. Investors are looking for safe haven assets, which could support the USD in the short term and put pressure on the AUD.

Technical analysis

AUD/USD Falls Sharply: Will the Downtrend Continue as RBA Prepares to Cut Rates?_1

Bollinger Bands (20,0,2): Price is trading near the lower line of the Bollinger Band, indicating a potential continuation of the downtrend if it breaks the 0.6300 support level.

Ichimoku indicator (9,26,52): Price has fallen below the Ichimoku cloud, indicating a strong downtrend.

Stochastic Oscillator (5,3,3): This indicator is in the oversold zone, indicating a possible short-term reversal, but not strong enough to confirm an uptrend.

Support and resistance levels:

Support: 0.6300 (next support level).

Resistance: 0.6350 (nearest resistance level).

Trading Recommendations

Entry: Open a sell order when price confirms breaking the 0.64 support level.

Take Profit: 0.6250 (next support level).

Stop Loss: 0.6460 (nearest resistance level).

Risk Warnings and Disclaimers

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Adam

Forex

Summary:

The USD/CAD pair continues its strong downtrend, trading around 1.3855. The weakening of the USD and expectations of a rate cut by the Bank of Canada (BoC) are putting downward pressure on the pair.

SELL USDCAD

Close Time

CLOSED

1.38200

Entry Price

1.37500

1.38600

1.37677 -0.00023 -0.02%

40.0

Pips

Loss

1.37500

1.38603

Exit Price

1.38200

Entry Price

1.38600

Overview

The USD/CAD pair is currently trading around 1.3855, down sharply from a high of 1.4543 in January 2025. The weakening USD and expectations of a BoC rate cut are putting downward pressure on the pair. USD/CAD could continue its downtrend if it remains below the 1.3800 support level without a clear reversal signal.

Market psychology

Current market sentiment reflects concerns about the global economic outlook and the divergence in monetary policy between the US and Canada. Investors are looking for safe-haven assets, which could support the CAD in the short term.

Technical analysis

USD/CAD continues its strong downtrend_1

Bollinger Bands (20,0,2): Price is trading near the lower line of the Bollinger Band, indicating a potential continuation of the downtrend if it breaks the support level of 1.3800.

Ichimoku indicator (9,26,52): Price has fallen below the Ichimoku cloud, indicating a strong downtrend.

Stochastic Oscillator (5,3,3): This indicator is in the oversold zone, indicating a possible short-term reversal, but not strong enough to confirm an uptrend.

Support and resistance levels:

Support: 1.3800 (next support level).

Resistance: 1.3855 (nearest resistance level).

Trading Recommendations

Entry: Open a sell order when price confirms a break of the support level 1.3820.

Take Profit: 1.3750 (next support level).

Stop Loss: 1.3860 (nearest resistance level)

Risk Warnings and Disclaimers

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Eva Chen

Forex

Economic

Summary:

EURGBP has retreated further from its two-year highs, with the divergence in policy expectations between the Bank of England and the European Central Bank (ECB) potentially emerging as a headwind for the currency pair.

SELL EURGBP

Close Time

CLOSED

0.85073

Entry Price

0.82670

0.86650

0.87772 -0.00017 -0.02%

39.9

Pips

Profit

0.82670

0.84674

Exit Price

0.85073

Entry Price

0.86650

Fundamentals

Alfred Kammer, the International Monetary Fund's (IMF) Director for Europe, indicated that Germany's increased infrastructure spending will provide some support for Europe's growth outlook, but it is insufficient to offset the damage caused by US tariffs.

In an interview with CNBC, Kammer emphasized that "tariffs and trade tensions are weighing on the outlook rather than providing any positive fiscal impact."

He noted that the IMF has "significantly downgraded" its growth forecasts for advanced economies in Europe over the next two years and has made even steeper downward adjustments to its growth projections for emerging economies in the eurozone. The IMF has revised its growth forecasts for the eurozone downward by 0.2% for both 2025 and 2026, now expecting growth rates of 0.8% and 1.2%, respectively.

Kammer also offered clear policy advice to the ECB. Acknowledging the success of deflationary measures, he stated that the ECB has "room to cut rates by another 25 basis points in the summer." Thereafter, rates should be maintained around 2%, barring any significant shocks.

Francois Villeroy de Galhau, a member of the ECB's Governing Council from France, expressed confidence today that neither France nor Europe is facing an imminent recession risk, while inflation is expected to continue declining.

In an interview with RTL radio, Villeroy reiterated that despite global uncertainties, the ECB still retains "the leeway for gradual rate cuts."

Villeroy also issued a strong warning about the risks posed by US trade policies. He criticized the protectionist stance of the US government, stating that it "not only harms the US economy but, unfortunately, also the world economy."

He emphasized that protectionism ultimately leads to "slower growth and higher inflation."

Market Observations: The divergence in policy expectations between the Bank of England and the ECB may further weigh on the euro.

According to data released on Monday, UK retail sales unexpectedly rose by 0.4% in March, with the previous month's increase revised downward to 0.7%. Combined with market expectations that the Bank of England's rate-cutting pace will be slower than that of other major central banks, including the ECB, this should support the pound and cap any upside for EURGBP.

Technical Analysis

During the day, the trend of EURGBP currently remains neutral-biased downward, following the breach of the 0.8518 support level.

On the upside, if bulls break above the minor resistance at 0.8622, it will first trigger a retest of the 0.8737 level. A sustained hold above this resistance would reignite the broader uptrend that began at 0.8221.

However, a sustained break below 0.8518 would push EURGBP further down towards the 55-day moving average, currently located at 0.8450.

Trading Recommendations

Trading Direction: Sell

Entry Price: 0.8530

Target Price: 0.8267

Stop Loss: 0.8665

Valid Until: May 13, 2025, 23:55:00

Support: 0.8465/0.8379/0.8313

Resistance: 0.8547/0.8565/0.8584

Risk Warnings and Disclaimers

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Eva Chen

Economic

Forex

Summary:

The UK retail sales increased by 0.4% MoM in March and by 1.6% in the first quarter. Amid trade tensions, the Bank of England is expected to avoid a significant rate cut.

BUY GBPUSD

Close Time

CLOSED

1.33479

Entry Price

1.36000

1.28300

1.33897 +0.00190 +0.14%

68.3

Pips

Loss

1.28300

1.32796

Exit Price

1.33479

Entry Price

1.36000

Fundamentals

GBPUSD rebounded during the European session on Monday, reclaiming the key level of 1.3350. The pause in the US dollar's rally, coupled with a modest improvement in market risk sentiment, facilitated the recovery of GBPUSD.

Data released by the UK Office for National Statistics on Monday revealed that retail sales in March rose by 0.4% MoM, exceeding market expectations of a 0.3% decline. The sales performance was stronger than expected, which was primarily attributed to favorable weather conditions that bolstered sales for clothing and outdoor goods retailers. However, this growth was partially offset by a weak performance from supermarkets.

On a quarterly basis, the overall performance of retail sales paints an encouraging picture of consumer resilience. Retail sales for the first quarter increased by 1.6% QoQ and 1.7% YoY. These figures suggest that despite broader economic uncertainties, UK consumers remain relatively active.

However, household confidence was severely dented in April due to trade tensions and a series of annual price increases, including council tax and energy bills. As a result, the long-awaited recovery in consumer spending may prove to be short-lived.

The Bank of England's Monetary Policy Committee is scheduled to meet next month to determine the next steps. Amid signs of an economic slowdown, investors widely expect a 25-basis-point rate cut. The Bank of England is likely to remain cautious.

In contrast, investors have been pricing in the possibility of the Federal Reserve restarting its rate-cutting cycle in June, with at least three rate cuts anticipated by the end of this year. These concerns, coupled with worries about the economic impact of US trade policies, have deterred dollar bulls from making new bets and provided some support for GBPUSD. As a result, the pound is likely to continue to challenge the key resistance level of 1.3434, which it has not yet breached (the euro has already broken through its key barrier, reaching a three-year high).

Technical Analysis

GBPUSD rose during the European session on Monday, reversing the downward trend observed over the previous three trading days.

After pulling back from the short-term high of 1.3422, GBPUSD still has the potential to decline further. However, the downside should be limited by the 38.2% Fibonacci retracement level of 1.2917, derived from the range between 1.2099 and 1.3422.

On the upside, if GBPUSD can sustainably break above 1.3354, it will resume its broader upward trend.

Trading Recommendations

Trading Direction: Long

Entry Price: 1.3318

Target Price: 1.3600

Stop Loss: 1.2830

Valid Until: May 13, 2025, 23:55:00

Support: 1.3234/1.3203/1.3032

Resistance: 1.3423/1.3434/1.3519

Risk Warnings and Disclaimers

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Alan

Forex

Summary:

Polls indicate that the Liberal Party is highly likely to win the Canadian federal election. The risk of trade friction between Canada and the United States may intensify, posing a potential recession risk for the Canadian economy.

BUY USDCAD

Close Time

CLOSED

1.38758

Entry Price

1.41400

1.37700

1.37677 -0.00023 -0.02%

105.8

Pips

Loss

1.37700

Exit Price

1.38758

Entry Price

1.41400

Fundamentals

The market's focus has shifted to the outcome of the Canadian federal election, with the new government's stance on trade negotiations expected to influence the outlook for the Canadian dollar. Polls show that the Liberal Party is leading with nearly 43% support, compared to the Conservative Party's 39%. The market generally anticipates that the Liberal Party's compromising stance on U.S. tariff policies may continue, further escalating trade friction risks between Canada and the United States. If the Liberal Party remains in power, the 25% tariff imposed by the U.S. on Canadian automobiles could lead to an 18% reduction in exports, resulting in a loss of approximately CAD 12 billion.

Moreover, it is worth noting that a recent forecast report by the Canadian Federation of Independent Business (CFIB) indicates a weak economic growth in Canada in the first quarter of this year, with a significant contraction expected in the second quarter. The report estimates that Canada's first-quarter GDP will grow at an annualized rate of 0.8%, while the second quarter is projected to contract at an annualized rate of 5.6%.

Overall, if the Liberal Party wins the Canadian federal election today, the Canadian economy is likely to face a recession risk, and the Canadian dollar will come under depreciation pressure.

Technical Analysis

On the weekly chart, after a sustained decline, USDCAD halted its downward trend last week, closing a bullish Doji candlestick near the support level of 1.3880. This suggests strong support at this level, and USDCAD is likely to rebound upward in the short term.

Looking at the moving average system, the MA60 and MA144 of USDCAD remain in a bullish alignment, indicating that the long-term upward trend of USDCAD has not been broken.

For short-term trading, it is recommended that traders adopt a strategy of buying on dips, using last week's low of 1.3780 as a stop-loss level. If a new low is reached, traders should consider closing their positions to limit losses.

Trading Recommendations

Trading Direction: Long

Entry Price: 1.3860

Target Price: 1.4140

Stop Loss: 1.3770

Valid Until: May 12, 2025, 23:00:00

Support: 1.3780/1.3600

Resistance: 1.4027/1.4158

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

AUD/JPY retreats as rising expectations of an RBA rate cut weigh on the Australian Dollar. While easing US-China tensions could cushion losses, the Yen's safe-haven appeal weakens, limiting downside pressure on the pair.

SELL AUDJPY

Close Time

CLOSED

91.800

Entry Price

86.000

93.500

103.137 -0.516 -0.50%

38.7

Pips

Profit

86.000

91.413

Exit Price

91.800

Entry Price

93.500

The Australian Dollar slipped against the Japanese Yen on Monday, halting a three-day rally, as growing expectations for an interest rate cut by the Reserve Bank of Australia (RBA) weighed on the currency. AUD/JPY was last seen trading around 91.80 during early European hours, retreating from recent highs as sentiment toward the Aussie cooled.

Markets are increasingly pricing in a 25-basis point rate cut at the RBA’s May 20 meeting, following forecasts last week from Westpac analysts. The bank cited rising economic headwinds and mounting global trade uncertainties as key drivers behind its projection. Given the RBA’s explicitly data-dependent stance, market participants are finding it increasingly difficult to confidently predict policy moves beyond the immediate term adding a layer of caution to Australian Dollar positions.

The RBA’s potential pivot to looser monetary policy comes amid a broader reassessment of global growth prospects. Softening inflation figures, tepid consumer spending, and weaker-than-expected labor market data in Australia have collectively fueled expectations that policymakers may soon need to act preemptively to prevent a sharper slowdown.

While the prospect of lower Australian rates weighs heavily on AUD/JPY, the currency pair could find some relief from emerging signs of a thaw in US-China trade relations. On Friday, Beijing announced it would exempt certain US imports from its 125% retaliatory tariffs, igniting cautious optimism that the bitter trade war between the world's two largest economies might finally be easing. Australia, as a major supplier of commodities to China, remains highly sensitive to any shifts in Chinese demand or broader trade dynamics.

Michael Hart, President of the American Chamber of Commerce in China, emphasized that tariff rollbacks could create meaningful opportunities for exporters, including key Australian sectors such as agriculture, resources, and education. Still, optimism was tempered over the weekend after a Chinese embassy spokesperson told Reuters there were "no ongoing consultations or negotiations" regarding tariffs with the US, cautioning Washington against "creating confusion."

Such conflicting signals from Beijing have led to a more cautious risk tone among investors, even as global trade sentiment shows tentative signs of stabilizing.

On the Japanese side, the safe-haven Yen has weakened slightly, providing an offsetting force against Aussie headwinds. Improving global trade sentiment has reduced demand for traditional safe-haven assets, including the JPY. Last week, Japan’s Finance Minister Katsunobu Kato and newly appointed US Treasury Secretary Scott Bessent met privately on the sidelines of the IMF and World Bank Spring Meetings in Washington. While Kato offered few specifics, he indicated that the US and Japan would maintain "close and constructive dialogue" on currency issues a comment suggesting that while Japan remains vigilant about Yen volatility, active intervention appears unlikely in the immediate term.

Technical Analysis

From a technical perspective, AUD/JPY faced a notable rejection around the 92.00 resistance level early Monday, reinforcing concerns over fading buying momentum. After pushing into this horizontal resistance zone, price action shows early signs of a potential local bearish correction.

The Relative Strength Index (RSI) has begun to tilt lower, suggesting a loss of upside momentum. Traders will be watching closely to see if AUD/JPY can hold above the key 91.50–91.60 support zone; a decisive break lower could open the door for a deeper pullback toward the 86.00 psychological level.

Intraday bias leans bearish unless 92.00 is breached convincingly. Thus, a tactical short position targeting a move back toward the 91.00 area appears attractive for short-term traders, provided risk is carefully managed above the 92.00 breakout zone.

TRADE RECOMMENDATION

SELL AUDJPY

ENTRY PRICE: 91.80

STOP LOSS: 93.50

TAKE PROFIT: 86.00

Risk Warnings and Disclaimers

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Manuel

Forex

Economic

Summary:

The 8-hour RSI has reached 66.90, approaching overbought territory, which could invite selling pressure from the resistance zone.

SELL AUDUSD

Close Time

CLOSED

0.63950

Entry Price

0.62000

0.64700

0.66526 +0.00006 +0.01%

9.3

Pips

Profit

0.62000

0.63857

Exit Price

0.63950

Entry Price

0.64700

The University of Michigan's Consumer Sentiment Index for the United States has fallen for a fourth consecutive month, reflecting growing concerns among households. The indicator dropped by 4.8 points in April, reaching 52.2—its lowest reading in 33 months. Despite the decline, the figure still exceeded market expectations, which had forecast a reading of 50.8.

Meanwhile, the Consumer Expectations Index fell sharply to 47.3 from 52.6, marking its lowest level since July 2022. According to the accompanying report, while the decline in Current Conditions during April was relatively modest, the Expectations component plunged, weighed down by deteriorations in both personal finances and broader business conditions. Expectations have now dropped a steep 32% since January—the largest quarterly percentage decline recorded since the recession of 1990.

Inflation expectations also moved higher. The 1-year inflation outlook surged to 6.5% in April from 5% in March, although it still came in slightly below the 6.7% consensus forecast. For the 5-year horizon, inflation expectations climbed to 4.4% from the previous 4.1%, aligning with market projections.

On the geopolitical front, President Trump reiterated that the U.S. remains engaged with China over trade issues, though Chinese authorities denied that any active tariff negotiations are underway. Bloomberg reported that China may consider lifting tariffs on select U.S. goods; however, Chinese officials largely sidestepped questions regarding potential exemptions.

Looking ahead, market participants are preparing for a busy data calendar next week, which includes the U.S. JOLTS report for March, the first estimate of Q1 GDP growth for 2025, the ISM Manufacturing PMI, and April’s Non-Farm Payrolls report.

As for monetary policy, traders are pricing in a 92% probability that the Federal Reserve will leave interest rates unchanged at its upcoming meeting, according to Prime Market Terminal data. Nonetheless, market expectations suggest that the Fed’s policy rate could end the year at 3.45%, implying approximately 86 basis points of easing.

Meanwhile, the Reserve Bank of Australia (RBA) continues to strike a cautious tone regarding monetary policy. Minutes from its March 31–April 1 meeting reveal that while May’s meeting could provide an opportunity to reassess the outlook, the RBA has not committed to any specific changes. This cautious approach underscores the mixed signals emerging from the Australian economy.

Australia’s labor market, for instance, is showing early signs of strain. The unemployment rate edged up to 4.1% in March, slightly better than the expected 4.2%, but job creation disappointed, with just 32.2K positions added compared to the forecasted 40K. Moreover, the Westpac Leading Index, which tracks future economic momentum, slowed to 0.6% in March, down from 0.9% the month before—suggesting a loss of growth traction.

The RBA stressed that risks to both the upside and downside remain and reiterated its data-driven approach to balancing inflation pressures against the risk of slower growth.

Improving U.S.-China trade sentiment has helped lift global equity markets recently. However, this shift has slightly diminished demand for safe-haven assets like the Swiss franc (CHF), which had previously strengthened significantly amid escalating tariff tensions. The CHF’s strong performance has raised speculation that the Swiss National Bank (SNB) might intervene in currency markets or consider adjusting its longstanding negative interest rate policy should the currency’s appreciation threaten export competitiveness. Potential Downturn Looms as AUD/USD Tests Key Barrier_1

Potential Downturn Looms as AUD/USD Tests Key Barrier_1

Technical Analysis

The AUD/USD pair recently climbed to a local high of 0.6441, briefly surpassing the previous peak at 0.6410 before facing sharp rejection. This price action could signal that the 0.6440–0.6450 zone is becoming a significant resistance area, raising the possibility of a downside correction from current levels. Supporting this view, the 8-hour RSI has reached 66.90, approaching overbought territory, which could invite selling pressure from the resistance zone.

Additionally, the 100- and 200-period moving averages are converging around 0.6290, indicating that the average price of the last 100 and 200 candles is clustered near this level. Statistically, this could act as a magnet for price retracements, reinforcing the likelihood of a corrective move toward this zone. Below that, the next key support lies at 0.6200, a level that has historically acted as a strong floor for price action and could serve as a target should bearish momentum persist.

However, should AUD/USD manage to break above 0.6450 with conviction, the bullish trend could extend further, invalidating near-term bearish signals and opening the door for additional upside gains.

Trading Recommendations

Trading direction: Buy

Entry price: 0.6395

Target price: 0.6200

Stop loss: 0.6470

Validity: May 06, 2025 15:00:00

Risk Warnings and Disclaimers

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