The Australian Dollar (AUD) continues its losing streak against the US Dollar (USD) on Thursday, pressured by a mix of weaker-than-expected economic data and a strengthening greenback. Australia’s Consumer Inflation Expectations fell to 3.8% in November, down from 4.0% in the previous month, marking the lowest level since October 2021. Additionally, Australia’s Unemployment Rate held steady at 4.1% in October, as anticipated, but Employment Change showed a disappointing increase of only 15.9K new jobs, well below the expected 25.0K.
RBA’s Cautious Stance Amid Economic Uncertainty
Reserve Bank of Australia (RBA) Governor Michele Bullock indicated on Thursday that current interest rates are sufficiently restrictive and will remain so until the central bank gains more confidence in inflation trends. Bullock also highlighted the uncertainty around actions from the US Federal Reserve, stating that the RBA will avoid making any hasty decisions.
Meanwhile, the US Dollar continues to gain ground, bolstered by expectations surrounding US President-elect Donald Trump’s administration, which has sparked fears of inflationary tariffs and other potentially aggressive economic measures. These “Trump trades” have helped push the US Dollar Index (DXY) to a fresh high of 106.60, its strongest level since November 2023.
Fed‘s Tightening Path Weighs on AUD
The US Federal Reserve’s stance on inflation also continues to support the USD. St. Louis Fed President Alberto Musalem warned that persistent inflation makes it challenging for the Fed to ease rates, and Federal Reserve Bank of Kansas City President Jeffrey Schmid emphasized that market expectations for a rapid return to near-zero rates are unrealistic. This rhetoric comes on the heels of US Consumer Price Index (CPI) data showing a 2.6% YoY increase in October, in line with market expectations, while core CPI rose 3.3% as anticipated.
In contrast, Australia’s economic outlook faces headwinds. Australia’s Prime Minister Anthony Albanese recently discussed trade with US President-elect Trump, emphasizing the US-Australia trade surplus. However, a lack of concrete stimulus measures from China, Australia’s largest trading partner, has further dampened market sentiment. Despite announcing a significant debt package to support local governments, China’s stimulus fell short of investor expectations, weakening demand for Australian exports.
Technical Outlook for AUD/USD
The AUD/USD pair traded near 0.6490 on Thursday, showing signs of short-term downward pressure. The pair remains below the nine-day Exponential Moving Average (EMA), with the 14-day Relative Strength Index (RSI) sitting below 50, reinforcing a bearish outlook.
Support for the pair is seen around the psychological level of 0.6400, with a break below this level potentially accelerating the downtrend and bringing the pair closer to the yearly low of 0.6348, last seen on August 5. On the upside, immediate resistance is at 0.6500. A break above this level could push the pair toward the nine-day EMA at 0.6550, followed by the 14-day EMA at 0.6573. A sustained move above these levels could lead to a retest of the three-week high of 0.6687, with the psychological target at 0.6700.
Related Topics:
