AUD/USD rebounds to five

Investing.com -- The AUD/USD currency pair experienced a significant drop, reaching a five-year low of 0.593, before making a sharp recovery to above 0.64, the highest level seen since December 2024.

This rebound is largely attributed to the anticipation of early breakthroughs in trade negotiations and an increase in US policy-related risk premiums. The global backdrop continues to be the primary influence on the pair’s short-term performance.

UBS lowered country’s GDP forecasts due to the escalation of tariffs, but the overall impact is expected to be manageable. Growth is now projected to be at 1.9% for 2025, down from the previously estimated 2.1%, and 2% for 2026, also down from the earlier forecast of 2.1%. This adjustment aligns with the expectation of further rate cuts of 75 basis points this year, with the next 25 basis point cut anticipated in May.

Among G10 FX, the AUD/USD has been a laggard, although it made one of the strongest comebacks within the group following a 90-day delay in reciprocal tariffs by President Trump, excluding China. Given the overdone pricing of RBA cuts and net-short positioning, it is suggested to consider selling the pair’s downside at levels closer to 0.62 or below.

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