AUD slammed on Trump tariffs, even though we’ve seen this movie before

President-elect Donald Trump announced via Truth Social that he intends to sign an executive order to impose a 25% tariff exports from Mexico and Canada to the US, and a further 10% on goods from China. Keeping in mind that Trump made this announcement less than 24 hours after nominating Scott Bessent as US Treasury Secretary (a man markets expected to cool Trump’s hawkish potency), the timing makes it seem though Trump wants to remind markets who is really in control.

'Trump: The Sequel' looks similar to the original

But we’ve seen this movie before. We already know from his business dealings that he bargains hard, and likes to squeeze the best out of every deal by playing hard ball with outrageous propositions. And we saw him use the threat of eye-watering tariffs during his first term to get world leaders eating out of his hand. And it worked. Once again, world leaders are queuing up to strike deals in the hope of tariff exemptions. And today’s announcement means that the ball is in the courts of China, Mexican and Canada to try and squeeze a better deal or face the wrath of high trade tariffs.

We still have just under two months until Trump begins to sign his executive orders. And that plenty of time for key officials to meet with the Trump administration and attempt to hammer out a better deal. It also leaves plenty of time for turbulence as sentiment switches on a dime, multiple times over. Just like we saw in 2016.

Regardless, traders were quick to hit the panic button, sending the USD sharply higher against the Canadian dollar, Mexican peso and Chinese yuan. USD/CAD has already exceeded its average daily range by about 80%. But with the Canadian dollar rising against the Mexican Peso, markets are assuming this will hit Mexico the hardest. The yen and Swiss franc also suck in safe-haven flows, yet gold didn’t receive the same love as it printed a fresh low after suffering its worst day in four years.

AUD/USD technical analysis

The Australian dollar fell just over 1% from its daily high and traded briefly beneath its February low, which puts it on track for its most volatile day in two weeks. And Europe is still asleep. Yet AUD/USD has already bounced from its low to recoup around half of the day’s losses. The February low clearly has some significance.

A bullish divergence has formed on the RSI (14) and the daily low has also held above the weekly S1 pivot. Yet sellers clearly lurk around the October high, and given its established downtrend on the daily chart and threat of general market turbulence, I have to conceded for now that AUD/USD bulls need to tread with caution.

For now, the bias is to fade into moves towards the October high in anticipation of a break beneath the February low. But should Trump renege on such high tariffs, a risk-on bounce could be due. And that could help AUD/USD recover above its October low and revive the multi-week low call I made yesterday.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.