AUD/USD near multi-year low on Fed hawkishness and US NFP anticipation
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Summary
The AUD/USD pair remains depressed below the 0.6200 mark, trading near its lowest levels since October 2022. Market sentiment continues to favor the US Dollar (USD), buoyed by the Federal Reserve's (Fed) hawkish stance, while the Australian Dollar (AUD) suffers from RBA rate cut bets and US-China trade tensions.
The dominance of the US dollar
The USD Index (DXY) stays resilient near a two-year peak, driven by:
Hawkish Fed outlook
The Fed plans to implement only two quarter-point rate cuts in 2025 as inflation in the US remains stubbornly high.
Minutes from the December FOMC meeting emphasized cautious rate cuts amid concerns about a tight labor market and stalling inflation progress.
Rising treasury yields
Elevated US Treasury bond yields, supported by hawkish Fed policies, enhance the Greenback’s appeal.
Geopolitical risks and uncertainty surrounding President-elect Donald Trump’s tariff plans bolster the USD as a safe haven.
Australian dollar under pressure
The AUD continues to struggle due to domestic and external factors:
RBA rate cut bets
Rising expectations for a February rate cut, fueled by declining core inflation in Australia, weigh on the Aussie.
China’s economic slowdown
As a key trading partner, China's economic challenges amplify downward pressure on the AUD.
US-China trade tensions
Concerns over potential US tariffs on China under the incoming Trump administration undermine risk-sensitive assets like the AUD.
Market focus: US Nonfarm Payrolls (NFP) report
Traders are sidelined ahead of the crucial December NFP report, expected to show:
Job growth: 160,000 new jobs, down from November’s 227,000 gain.
Unemployment rate: Stable at 4.2%.
Wage inflation: Annual growth of 4%, unchanged from November.
A stronger-than-expected report could reinforce the Fed’s hawkish stance, boosting the USD further, while a weaker outcome may provide temporary relief for the AUD/USD pair.
Technical analysis: bearish bias prevails
Key resistance levels
0.6235 – Immediate resistance limiting short-term recovery.
0.6300 – Psychological barrier aligning with a 20-day EMA.
Key support levels
0.6175 – Current low, with further downside potential.
0.6120 – Multi-year low and a critical support zone.
The Relative Strength Index (RSI) is nearing oversold territory, which may deter aggressive bearish bets in the short term. However, any recovery is likely to be met with renewed selling interest given the fundamental backdrop.
Conclusion
The AUD/USD pair remains under sustained pressure as a hawkish Fed, RBA rate cut expectations, and US-China tensions favor the USD. While oversold conditions might limit immediate losses, the broader downtrend remains intact, and the pair’s path of least resistance is still to the downside. Traders should closely monitor the upcoming US NFP report for fresh directional cues.
The AUD/USD pair remains depressed below the 0.6200 mark, trading near its lowest levels since October 2022. Market sentiment continues to favor the US Dollar (USD), buoyed by the Federal Reserve's (Fed) hawkish stance, while the Australian Dollar (AUD) suffers from RBA rate cut bets and US-China trade tensions.
The dominance of the US dollar
The USD Index (DXY) stays resilient near a two-year peak, driven by:
Hawkish Fed outlook
The Fed plans to implement only two quarter-point rate cuts in 2025 as inflation in the US remains stubbornly high.
Minutes from the December FOMC meeting emphasized cautious rate cuts amid concerns about a tight labor market and stalling inflation progress.
Rising treasury yields
Elevated US Treasury bond yields, supported by hawkish Fed policies, enhance the Greenback’s appeal.
Geopolitical risks and uncertainty surrounding President-elect Donald Trump’s tariff plans bolster the USD as a safe haven.
Australian dollar under pressure
The AUD continues to struggle due to domestic and external factors:
RBA rate cut bets
Rising expectations for a February rate cut, fueled by declining core inflation in Australia, weigh on the Aussie.
China’s economic slowdown
As a key trading partner, China's economic challenges amplify downward pressure on the AUD.
US-China trade tensions
Concerns over potential US tariffs on China under the incoming Trump administration undermine risk-sensitive assets like the AUD.
Market focus: US Nonfarm Payrolls (NFP) report
Traders are sidelined ahead of the crucial December NFP report, expected to show:
Job growth: 160,000 new jobs, down from November’s 227,000 gain.
Unemployment rate: Stable at 4.2%.
Wage inflation: Annual growth of 4%, unchanged from November.
A stronger-than-expected report could reinforce the Fed’s hawkish stance, boosting the USD further, while a weaker outcome may provide temporary relief for the AUD/USD pair.
Technical analysis: bearish bias prevails
Key resistance levels
0.6235 – Immediate resistance limiting short-term recovery.
0.6300 – Psychological barrier aligning with a 20-day EMA.
Key support levels
0.6175 – Current low, with further downside potential.
0.6120 – Multi-year low and a critical support zone.
The Relative Strength Index (RSI) is nearing oversold territory, which may deter aggressive bearish bets in the short term. However, any recovery is likely to be met with renewed selling interest given the fundamental backdrop.
Conclusion
The AUD/USD pair remains under sustained pressure as a hawkish Fed, RBA rate cut expectations, and US-China tensions favor the USD. While oversold conditions might limit immediate losses, the broader downtrend remains intact, and the pair’s path of least resistance is still to the downside. Traders should closely monitor the upcoming US NFP report for fresh directional cues.