• AUD/USD advances to near 0.6390 despite the escalating trade war between the US and China.
• US President Trump announced a 90-day pause on reciprocal tariffs for all of his trading partners, except China.
• Trump’s tariff agenda has kept the US Dollar on the backfoot.

The AUD/USD pair extends its winnings streak for the fifth trading day on Tuesday and revisits the monthly high of 0.6380. The Aussie pair performs strongly in the last few trading days even though the intensifying trade war between the United States (US) and China has dampened the outlook of the Australian economy.

Historically, the Australian Dollar (AUD) underperforms when the economic outlook of China deteriorates, given the high dependence of the Australian economy on its exports to the Asian giant.

US President Donald Trump has declared a 90-day pause on the execution of reciprocal tariffs for all of his trading partners, except China. The world’s second largest nation retaliated against Trump’s reciprocal tariffs by imposing additional duties on goods imported from the US.

Meanwhile, the US Dollar (USD) struggles to hold its recent lows as financial market participants expect that Trump’s economic policies are painful for the US economy in the near term. Trump’s tariff policies are expected to boost inflationary pressures and slow down economic growth. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades cautiously slightly above the three-year low of 99.00.

AUD/USD extends its upside to near the March 18 high of 0.6390, the highest level seen in over a month. The near-term outlook of the pair is upbeat as it holds the 20- and 50-day Exponential Moving Averages (EMAs), which trade around 0.6244 and 0.6270, respectively.

The 14-day Relative Strength Index (RSI) rises to near 58.00 after a V-shape recovery from below 40.00. Such a scenario indicates a strong bullish reversal.

More upside would appear if the pair breaks above the March 18 high of 0.6390. The scenario will open doors for the pair towards the December 5 high of 0.6456 and the round-level resistance of 0.6500.

On the flip side, a downside move below the March 4 low of 0.6187 will expose the pair towards the February low of 0.6087, followed by the psychological support of 0.6000.

AUD/USD daily chart

(Click on image to enlarge)

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