Australian Dollar Rises Amid Weak US Dollar and Stable CPI Data
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The Australian Dollar (AUD) advanced on Wednesday, breaking a three-day losing streak as the US Dollar (USD) remained subdued amid bond market optimism and anticipation of critical US economic data. Support for the AUD also came from the Reserve Bank of Australia’s (RBA) hawkish sentiment on monetary policy, despite domestic inflation data showing slower-than-expected growth.
Key Drivers of AUD/USD Movement
The Australian Dollar benefited from stability in domestic inflation figures, with the Monthly Consumer Price Index (CPI) rising by 2.1% year-over-year in October, consistent with the previous month but slightly below the forecasted 2.3%. This represents the lowest inflation rate since July 2021, remaining within the RBA’s target range of 2-3% for the third consecutive month.
Market sentiment around the AUD/USD pair was tempered by concerns over US-China trade relations. President-elect Donald Trump’s announcement of a 10% tariff increase on all Chinese imports raised concerns about the potential impact on Australian markets, given Australia’s close trade ties with China.
Geopolitical and economic developments in the US further shaped the pair’s dynamics. The latest Federal Open Market Committee (FOMC) minutes signaled caution on rate cuts amid easing inflation and a robust labor market. Expectations of slower Fed easing were reinforced by recent S&P Global US PMI data, which painted a resilient picture of economic activity.
Technical Analysis: Short-term bearish sentiment persists
The AUD/USD pair is trading near 0.6470, with technical indicators reflecting ongoing bearish momentum.
Support Levels:
The immediate support lies at the four-month low of 0.6434, recorded on November 26. A decisive break below this level could expose the yearly low of 0.6348, reached in August, with additional support near the descending channel’s lower boundary at 0.6320.
Resistance Levels:
The nine-day Exponential Moving Average (EMA) at 0.6495 and the 14-day EMA at 0.6512 serve as immediate resistance. Further resistance is observed at the upper boundary of the descending channel at 0.6550. A sustained break above this level could open the path toward the four-week high of 0.6687. The 14-day Relative Strength Index (RSI) remains below the neutral 50 level, signaling persistent bearish sentiment. The pair’s position within the descending channel suggests that any bullish attempts will face stiff resistance unless broader fundamentals shift significantly.
Market Outlook
The Australian Dollar’s trajectory will depend on external factors, particularly US economic data releases such as the Q3 GDP print and Personal Consumption Expenditure (PCE) Price Index. These figures will shape market expectations around the Federal Reserve’s rate path and influence USD dynamics.
Domestically, traders will watch RBA developments closely, as Australia’s largest banks have revised their rate cut forecasts. While Westpac and NAB predict the first rate cut in May, ANZ and CBA remain cautious with February projections.
Conclusion
The AUD/USD pair remains vulnerable to downside risks, with a break below 0.6434 likely to accelerate bearish momentum. However, a recovery above 0.6495 could signal a potential shift in sentiment, with further gains contingent on breaking key resistance at 0.6550. For now, traders should monitor developments in US economic data and trade relations for cues on the pair’s next
Key Drivers of AUD/USD Movement
The Australian Dollar benefited from stability in domestic inflation figures, with the Monthly Consumer Price Index (CPI) rising by 2.1% year-over-year in October, consistent with the previous month but slightly below the forecasted 2.3%. This represents the lowest inflation rate since July 2021, remaining within the RBA’s target range of 2-3% for the third consecutive month.
Market sentiment around the AUD/USD pair was tempered by concerns over US-China trade relations. President-elect Donald Trump’s announcement of a 10% tariff increase on all Chinese imports raised concerns about the potential impact on Australian markets, given Australia’s close trade ties with China.
Geopolitical and economic developments in the US further shaped the pair’s dynamics. The latest Federal Open Market Committee (FOMC) minutes signaled caution on rate cuts amid easing inflation and a robust labor market. Expectations of slower Fed easing were reinforced by recent S&P Global US PMI data, which painted a resilient picture of economic activity.
Technical Analysis: Short-term bearish sentiment persists
The AUD/USD pair is trading near 0.6470, with technical indicators reflecting ongoing bearish momentum.
Support Levels:
The immediate support lies at the four-month low of 0.6434, recorded on November 26. A decisive break below this level could expose the yearly low of 0.6348, reached in August, with additional support near the descending channel’s lower boundary at 0.6320.
Resistance Levels:
The nine-day Exponential Moving Average (EMA) at 0.6495 and the 14-day EMA at 0.6512 serve as immediate resistance. Further resistance is observed at the upper boundary of the descending channel at 0.6550. A sustained break above this level could open the path toward the four-week high of 0.6687. The 14-day Relative Strength Index (RSI) remains below the neutral 50 level, signaling persistent bearish sentiment. The pair’s position within the descending channel suggests that any bullish attempts will face stiff resistance unless broader fundamentals shift significantly.
Market Outlook
The Australian Dollar’s trajectory will depend on external factors, particularly US economic data releases such as the Q3 GDP print and Personal Consumption Expenditure (PCE) Price Index. These figures will shape market expectations around the Federal Reserve’s rate path and influence USD dynamics.
Domestically, traders will watch RBA developments closely, as Australia’s largest banks have revised their rate cut forecasts. While Westpac and NAB predict the first rate cut in May, ANZ and CBA remain cautious with February projections.
Conclusion
The AUD/USD pair remains vulnerable to downside risks, with a break below 0.6434 likely to accelerate bearish momentum. However, a recovery above 0.6495 could signal a potential shift in sentiment, with further gains contingent on breaking key resistance at 0.6550. For now, traders should monitor developments in US economic data and trade relations for cues on the pair’s next