The Australian Dollar (AUD) experienced a modest decline on Friday, weighed down by disappointing economic growth data and concerns that the Reserve Bank of Australia (RBA) may adopt a more dovish stance at next week’s monetary policy meeting. This could pave the way for a potential rate cut in February, contributing to further selling pressure on the currency.
Traders are also closely watching the release of the US November employment report, including Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings. The US is expected to add 200,000 jobs in November, a significant rebound from October’s modest increase of 12,000. A weaker-than-expected jobs report could undermine the US Dollar, offering some support for AUD/USD.
RBA Rate Cut Expectations Grow Amid Slower Economic Growth
A Reuters poll of 44 economists indicates that the RBA is likely to hold the cash rate at 4.35% in its upcoming meeting, but expectations have shifted towards a 25 basis point cut to 4.10% in Q2 2025—later than previously anticipated.
Australia’s GDP grew by just 0.3% quarter-on-quarter in the third quarter, a slight improvement over the 0.2% growth in Q2 but below the market consensus of 0.4%. This underperformance adds to concerns about the nation’s economic outlook, potentially influencing the RBA’s future policy decisions.
US Labor Market Data Weighs on US Dollar
On the US side, weekly Initial Jobless Claims rose by 9,000 to 224,000 for the week ending November 29, surpassing expectations and marking an increase from the previous week’s 215,000. However, Continuing Jobless Claims fell by 23,000 to 1.871 million for the week ending November 22, signaling some stabilization in the labor market.
Federal Reserve Chairman Jerome Powell commented Wednesday that the US economy is performing better than expected, which could lead the Fed to exercise caution in reducing interest rates further. This dovish outlook for the Fed contrasts with the RBA’s stance, adding to the bearish sentiment surrounding the AUD.
Technical Outlook: Bearish Bias for AUD/USD
The Australian Dollar remains under pressure on the charts, with the AUD/USD pair trading below the key 100-day Exponential Moving Average (EMA). The Relative Strength Index (RSI) is positioned below the 50-midline at 38.85, signaling bearish momentum. This suggests that the most likely direction for the currency pair is to the downside.
Support for AUD/USD is seen at 0.6300, the lower boundary of the current descending trend channel, and a key psychological level. A break below this level could open the door to further losses toward 0.6285, the low from October 3, 2023.
On the upside, sustained bullish momentum above 0.6500 could see the pair challenge the 100-day EMA at 0.6615, with further upside potential toward 0.6687, the high reached on November 7.
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