The AUD/USD outlook shows poor risk appetite after a Chinese company unveiled a new free AI model that rocked the markets. At the same time, the dollar gained as Trump made more threats to impose tariffs on specific goods. 

A new Chinese company, DeepSeek, revealed a free AI model on Monday that sent investors scrambling for safe-haven assets like the yen. On the other hand, equities and risky currencies like the Aussie collapsed. Notably, the panic came from news that the AI model uses lower-cost chips and less data, meaning big competition for US AI companies like Nvidia. 

The Australian dollar is a risk-sensitive currency that reacts to a shift in market sentiment. Moreover, the currency fell as the greenback strengthened after US President Donald Trump resumed his tariff threats. He announced plans to impose tariffs on imported computer chips, pharmaceuticals, and steel. Such an outcome would increase US production and demand, boosting the economy and the dollar. 

Meanwhile, on Tuesday, data revealed that business conditions in Australia improved in December. However, this resulted from increased shopping during the Christmas season. Traders are still pricing a likely RBA rate cut in February. On the other hand, the Fed will likely keep rates unchanged on Wednesday.

AUD/USD key events today

• US CB consumer confidence

AUD/USD technical outlook: Bears hit channel support

(Click on image to enlarge)

AUD/USD 4-hour chart

On the technical side, the AUD/USD price trades below the 30-SMA with the RSI below 50, suggesting a bearish bias. However, on a larger scale, the price trades in a bullish channel with a clear support and resistance line. The recent decline has brought the price to channel support, where bulls might emerge to seek new highs.

However, bulls must break above the 30-SMA and the 0.6300 resistance level to make higher highs. If this happens, USD/JPY will reach its channel resistance. 

On the other hand, If any of these resistances holds firm, bears might break out of the channel to signal a shift in sentiment. In this case, bears would aim for support levels like 0.6200 and 0.6150. Moreover, if the price maintains its position below the 30-SMA, it will confirm a steep downtrend. 

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