The Australian Dollar (AUD) continues to face challenges against the US Dollar (USD), trading near 0.6360 during Friday’s Asian session. The pair is weighed down by geopolitical tensions, weaker-than-expected domestic economic data, and robust USD strength driven by a hotter-than-expected US Producer Price Index (PPI).
Key Drivers Impacting AUD/USD
1. US Tariff Threats Create Headwinds for AUD
President-elect Donald Trump’s proposed 10% tariff on Chinese goods raises concerns for Australia, whose economy heavily relies on trade with China.
Beijing’s retaliation, including investigations into US tech companies and tightened restrictions on critical exports, adds further strain to the AUD.
2. Mixed Australian Employment Data
Employment Change for November increased by 35,600, exceeding expectations, while the Unemployment Rate dropped to 3.9%, its lowest since March.
Despite this, broader economic concerns persist, limiting AUD upside.
3. Slowing Australian Economic Growth
GDP growth in Q3 rose only 0.3%, missing forecasts of 0.4% and marking the slowest annual pace since the pandemic.
Weaker growth prospects have fueled expectations of a rate cut by the Reserve Bank of Australia (RBA) next April, with market pricing near 96%.
4. RBA’s Neutral Policy Stance
The RBA maintained its cash rate at 4.35% during its final meeting of the year, citing easing inflation risks. However, the bank remains vigilant and data-dependent.
US Factors Weighing on AUD/USD
1. Strong US Economic Data Supports USD
The US PPI rose 0.4% in November, the largest monthly increase since June, boosting inflation expectations.
Core PPI increased to 3.4% YoY, surpassing market estimates and reinforcing expectations of a cautious Fed rate path.
2. Federal Reserve Policy Outlook
Markets have fully priced in a 25 basis point rate cut at next week’s Federal Open Market Committee (FOMC) meeting, but lingering inflation concerns could temper further rate reductions.
Elevated US Treasury yields and a strong USD continue to cap AUD/USD gains.
Technical Analysis: AUD/USD Under Pressure
Key Levels to Watch
Support: Immediate support lies at the yearly low of 0.6348. A break below this level could intensify selling pressure, targeting the descending channel’s lower boundary near 0.6190.
Resistance: The nine-day EMA at 0.6404 serves as the first resistance level, followed by the 14-day EMA at 0.6427. A breakout above these levels could open the path toward the seven-week high at 0.6687.
Momentum Indicators
The 14-day Relative Strength Index (RSI) hovers just above the oversold threshold of 30, signaling sustained bearish momentum.
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