The Australian Dollar (AUD) recovers from recent losses on Thursday, buoyed by hawkish sentiment from the Reserve Bank of Australia (RBA) regarding interest rate policy. Despite this rebound, the AUD/USD pair remains under pressure as safe-haven flows toward the US Dollar (USD) persist amid geopolitical uncertainties, particularly the escalating Russia-Ukraine conflict.
RBA’s Hawkish Tone Offers Support
Minutes from the RBA’s November meeting revealed the central bank‘s commitment to maintaining a restrictive monetary stance to curb inflation. While no immediate rate changes were deemed necessary, the board emphasized its vigilance and willingness to act if inflationary pressures persist.
US Dollar Gains from Global Risks
The USD continues to benefit from its safe-haven status, bolstered by cautious remarks from Federal Reserve (Fed) officials and market expectations of inflationary pressures under the incoming Trump administration. Fed Chair Jerome Powell underscored the resilience of the US economy and dismissed the urgency for aggressive rate cuts, signaling a measured approach in monetary easing.
Key Economic Indicators to Watch
Market participants await the release of crucial US data later on Thursday, including:
- Initial Jobless Claims
- Philadelphia Fed Manufacturing Index
- Existing Home Sales
These metrics will influence the USD’s trajectory and provide further clarity on the Fed’s monetary policy outlook.
External Factors Impacting the AUD
China’s Economic Outlook: Australian markets remain closely tied to China, Australia’s largest trading partner. Optimistic remarks from China’s National Development and Reform Commission (NDRC) about economic recovery could provide indirect support to the AUD.
Geopolitical Tensions: Escalations in the Russia-Ukraine conflict, particularly Ukraine’s use of advanced US weaponry, add uncertainty to global markets, favoring the USD.
Technical Analysis: Bearish Bias Dominates
The AUD/USD pair is trading near 0.6510, slightly above its nine-day Exponential Moving Average (EMA), within a descending channel pattern that indicates bearish momentum.
Support Levels:
0.6370: Lower boundary of the descending channel.
0.6348: Yearly low reached on August 5.
Resistance Levels:
0.6519: Nine-day EMA, immediate resistance.
0.6536: 14-day EMA, a critical level for limiting further downside.
0.6687: Four-week high, marking a potential bullish reversal point.
The 14-day Relative Strength Index (RSI) remains below 50, reinforcing the bearish outlook.
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