AUD & NZD Outlook: Resilience Amid U.S. Dollar Strength, Australian Election, and China Trade Developments
ACY Securities - Jasper Osita
Overview
Despite a firm U.S. dollar boosted by strong NFP data, the Australian and New Zealand dollars have held their ground.
Backed by political stability, constructive trade developments, and China’s cautious reopening, AUD has emerged as the stronger performer—offering clearer upside potential than its Kiwi counterpart.
- Dollar Strength Holds Post-NFP – The U.S. dollar closed last week on a positive note after a stronger-than-expected NFP report (177k vs. 130k), reinforcing the Fed’s cautious, rate-hold stance.
- U.S.–China Tariff Talks Stir Risk Sentiment – Both Washington and Beijing have hinted at renewed negotiations, offering hope for easing tensions and supporting risk-sensitive currencies like AUD and NZD.
- AUD Outpaces NZD Amid Political and Trade Tailwinds – The Australian dollar is gaining ground against the Kiwi, driven by election-backed confidence, rising commodity demand, and a clear structural edge on the charts.
Robust Non-Farm Payroll Data Lifted Dollar
The U.S. dollar managed to hold its ground and closed on a positive note last week, lifted by stronger-than-expected U.S. jobs data and persistent rate-hold expectations from the Federal Reserve.
April’s Non-Farm Payrolls (NFP) report printed a surprise upside of 177k jobs added (vs.130k forecast), while the unemployment rate held steady at 4.2%. This reinforced the Fed’s cautious stance, providing little reason to ease policy soon.
For reference, check out my previous blog: https://acy.com/en/market-news/market-analysis/aud-nzd-defy-market-fears-us-china-trade-war-j-o-04292025-111346/
U.S.-China Trade & Tariff Outlook: A Double-Edged Sword
The U.S.-China trade relationship remains tense but has entered a phase of cautious optimism. While the U.S. imposed tariffs of up to 145% on Chinese goods under Trump’s revised trade plan, China responded with its own tariffs of up to 125%.
However, both sides have expressed a willingness to resume negotiations:
- China’s Ministry of Commerce confirmed it's reviewing U.S. proposals and open to future dialogue.
- Trump stated some tariffs “could be reduced at some point,” signaling flexibility depending on negotiations.
Why This Matters for AUD & NZD:
- AUD could gain from increased Chinese commodity demand if trade relations ease and industrial output rises.
- NZD benefits from broader risk appetite and reduced global trade friction, particularly if China pivots back toward imports.
Despite the greenback's regain of strength, the Australian and New Zealand dollars (AUD & NZD) have held their ground. These commodity-linked currencies are showing remarkable resilience, buoyed by political and economic stability at home and constructive trade developments in the Asia-Pacific region.
Political Continuity and Trade Momentum
Prime Minister Anthony Albanese’s re-election victory has delivered a confidence boost to Australian markets. The Labor government’s mandate for continuity is expected to drive stability in economic policy, infrastructure spending, and trade relationships.
Key Tailwinds for the AUD:
- Election Certainty: The renewed mandate reduces political uncertainty and supports risk sentiment around Australian assets.
- Domestic Strength: Retail sales remain firm, and Australia continues to post trade surpluses driven by iron ore, coal, and LNG exports.
- China Re-engagement: As China opens the door to renewed trade discussions with the U.S., Australia stands to benefit from improving commodity demand and eased political tensions.
Australia's strategic position as a major exporter to China allows it to benefit from any positive shifts in Asia-Pacific trade dynamics. In particular, a rebound in Chinese industrial activity could lift commodity prices and provide additional support to the AUD.
AUD Breaks with New Highs Ahead
Daily
As mentioned in my previous analysis, a break of 0.644 level could trigger renewed strength with potential new highs ahead for the Australian dollar.
As US-China trade sees optimism, this allowed the Australian dollar to hold its ground.
4-hour
Potential Scenarios
- Bullish: A break of 0.648 could trigger AUD to move higher, as long as we get bullish follow-through.
- Bearish: If 0.64342, and the volume imbalance resting at 0.64230 - 0.64410 fails to hold, we might see a deeper pullback for AUD.
NZD Starts to Move: Quiet Strength and Policy Clarity
The New Zealand dollar continues to show stability amid global crosswinds, supported by strong institutional credibility and stable demand for agricultural exports.
What’s Supporting NZD:
- Balanced RBNZ Stance: The Reserve Bank of New Zealand has adopted a wait-and-see approach, providing clear forward guidance without triggering volatility.
- Export Resilience: Dairy and meat exports continue to perform well, underpinned by demand in Asia and the Pacific.
- Diversified Trade Exposure: New Zealand’s growing trade ties beyond China help insulate it from the most severe effects of U.S.-China tensions.
NZD's appeal lies in its role as a low-volatility, carry-friendly currency with reduced correlation to U.S. macro risks. This profile is particularly attractive in times of global uncertainty.
Daily
With the same correlations with the Australian Dollar, NZD is still moving on a slow & steady pace.
4-Hour
Potential Scenario
- Bullish: A break of the 0.60294 level could push NZD higher.
- Bearish: A break below 0.59 level could bar NZD its strength to the upside.
The Better Trade for Long: Australian Dollar
Price is now testing resistance around 1.0850–1.0870. Momentum favors AUD over NZD, despite a small pullback today.
Why AUD Is Stronger Than NZD
- Price Action: AUDNZD rising = AUD outperforming NZD.
- Fundamentals: Australia has stronger tailwinds (election, China trade, commodities); NZD is steady but neutral.
- Structure Shift: Clear bullish move suggests possible trend reversal or continuation higher.
Trade Implication
- Favor AUD longs (e.g., AUDUSD, AUDJPY).
- Fade NZD strength or avoid NZD longs (due to a slow pace).
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