- AUD/USD lags G10 peers, tracking USD/CNH and Hang Seng Tech futures
- China pledges more fiscal support, but stimulus details remain vague
- U.S. tariffs doubled to 20% on top of existing levies, raising concerns over China’s export model
- Buyers lurking beneath .6200, resistance seen near .6300
Summary
Whether it was the mere mention of the word ‘tariff’ during Donald Trump’s State of the Union address or disappointment with details outlined in a report from China’s National Development and Reform Commission (NDRC), AUD/USD has not enjoyed a strong Asian session. It sits at the bottom of the G10 FX leaderboard, taking directional cues for large periods from tick movements in the offshore-traded Chinese yuan and Hang Seng Tech Index futures. Yes, you read that right. For now, fleeting evidence of a turnaround in the Australian economy matters little for AUD/USD traders in this headline-driven environment.
AUD/USD Resumes Role as China Proxy
You can see how closely AUD/USD tracked moves in USD/CNH in the wake of the NDRC report, at one point holding a rolling hourly correlation coefficient of 0.95 using a one-minute tick. A similarly strong relationship was also seen between AUD/USD and Hang Seng Tech futures around the time physical markets opened on the Chinese mainland. The Aussie has been nothing but a pure-play China proxy in Asia.
Source: TradingView
China NDRC Report Provides Few Surprises
For what it’s worth, details from the NDRC report suggest Beijing is willing to boost household spending—the missing piece in China’s nascent economic rebound post-pandemic. Policymakers pledged increased fiscal support to keep growth on track, lifting the annual budget deficit to 4% of GDP. ¥300 billion was earmarked for consumer subsidies on EVs, appliances, and other goods. Plans to expand access to child, aged, and disability care were also flagged, though specifics were noticeably absent. The annual growth target was left unchanged at “around” 5%.
The push to foster spending comes as trade tensions with the U.S. escalate, threatening China’s export-driven growth model. On Tuesday, U.S. levies introduced since Donald Trump’s return to the Oval Office were doubled to 20% on top of existing import tariffs. With the risk of an escalating trade conflict, Beijing is becoming increasingly reliant on domestic demand to drive growth, making consumer sentiment a crucial swing factor—not just for the Chinese economy, but for the Aussie dollar this year.
USD/CNH: 7.3000 a Key Battleground
Given its often high correlation with the Australian dollar over longer timeframes, those trading AUD/USD may want to keep an eye on USD/CNH when evaluating directional risks. Right now, the picture from USD/CNH is one of relative stability, likely reflecting efforts by Chinese policymakers to counteract capital outflow risks as trade tensions with the U.S. heat up.
Source: TradingView
A key battleground sits at the 50-day moving average just below 7.3000—an important level. Bullish probes were repeatedly thwarted either side of last weekend, adding to the string of failures above this level earlier in the year. While bearish reversals have been equally unsuccessful on moves between 7.2500 and the 200-day moving average, the longer this stalemate persists, the harder it is to see AUD/USD resuming its bearish trend.
AUD/USD: Buyers Lurking Beneath .6200
Unsurprisingly, given the recent price action in USD/CNH, bearish attacks beneath .6200 in AUD/USD have also failed this year. With so much pessimism already baked into the Aussie’s outlook, the near-term preference is to buy dips on moves below .6200.
Source: TradingView
The near-term directional bias remains higher, supported by the downtrend break in RSI (14) and the three-candle morning star pattern completed on Tuesday. Support levels to watch include .6238 and .6188. Resistance sits at .6300, .6337, and uptrend resistance near .6400.
Outside of tariff-related headlines, the key known event risk later Wednesday comes from the ISM Services PMI report for February. With U.S. economic sentiment increasingly fragile, any signs of acute weakness in this key sector could pressure the US dollar—unless it sparks a significant lift in risk aversion.