AUD/USD slides on trade tensions, awaits Fed and Australian CPI

• Aussie pair falls 0.80% to 0.6245 on Tuesday, testing 0.6250 support.
• Trump’s universal tariff plan on Colombia rattles markets, fueling risk aversion.
• Fed set to hold rates at 4.25%-4.50% on Wednesday; investors eye forward guidance.
• Australia’s Q4 CPI in focus with subdued inflation likely to bolster RBA rate cut bets.

AUD/USD extends its losing streak near 0.6250 as US President Trump’s proposed incremental tariffs on Colombia heighten trade war anxieties. The Federal Reserve (Fed) is widely expected to keep its benchmark rate steady midweek, although markets remain on edge about the central bank’s policy stance amid Trump’s push for immediate cuts. Meanwhile, the Aussie struggles under persistent speculation of RBA easing, and a moderate US Dollar recovery in the face of deepening risk-off sentiment.

Daily digest market movers: Aussie fell as the US Dollar recovered on a sour market mood

• President Trump endorsed a universal 2.5% levy on Colombia, which could climb monthly up to 20%. Investors see the plan as granting leverage in potential renegotiations, hence the rise in safe-haven demand for the Greenback.
• Sentiment soured further after China’s DeepSeek demonstrated affordable AI success, spurring a tech sector shakeout and driving up USD’s safe-haven appeal.
• Fed decision on deck as it is set to leave rates at 4.25%-4.50% on Wednesday. Traders will comb through policymakers’ remarks, especially given Trump’s calls for quick rate cuts.
• Australia’s CPI will be pivotal as the fourth-quarter inflation is seen slowing to 2.5% YoY (from 2.8%), whereas quarterly CPI growth could rise to 0.3% (versus Q3’s 0.2%). A weak figure might amplify chatter of the RBA unwinding its restrictive policy in February.
• Domestically, the RBA remains poised for a potential February rate cut if inflation persists below target and the economy fails to pick up steam.

AUD/USD technical outlook: Indicators diverge in a narrow trading range

The AUD/USD declined to 0.6245 on Tuesday, hovering within a tight 0.6230-0.6300 corridor. Technical cues are mixed: the Moving Average Convergence Divergence (MACD) histogram displays rising green bars, hinting at underlying bullish pressure.

Yet the Relative Strength Index (RSI) stands at 49 in negative territory, down sharply — signaling an ongoing lack of conviction. This mismatch underscores market indecision with traders awaiting pivotal data releases (the Fed’s policy decision and Australia’s CPI) for clearer direction before adopting more aggressive positions.