The Australian Dollar (AUD) faced further losses against the US Dollar (USD) for the second consecutive day on Tuesday, following the release of the Reserve Bank of Australia’s (RBA) December meeting minutes. Trading volumes were subdued ahead of the Christmas holiday.
The RBA’s meeting minutes revealed the board’s growing confidence in the inflation outlook, though risks remained. The board emphasized the necessity for monetary policy to remain “sufficiently restrictive” until inflation uncertainty is reduced. The RBA also noted that if future data aligns with or falls below expectations, it could prompt a policy easing. Conversely, stronger-than-expected data could prolong the current restrictive stance.
RBA Governor Michele Bullock pointed to the labor market’s strength as a key factor in the bank’s more gradual approach to monetary easing compared to other central banks.
US Dollar Rises Amid Fed‘s Hawkish Signals, Weaker Economic Data
The US Dollar rebounded after a sharp sell-off, as Federal Reserve (Fed) officials indicated fewer interest rate cuts next year, citing a slowdown in disinflation. However, softer US data, such as weaker-than-expected Durable Goods Orders and a drop in the Consumer Confidence Index, presented a mixed economic picture.
Markets now expect a 93% probability that the Fed will maintain interest rates at 4.25%–4.50% in January, according to the CME FedWatch tool. The US Durable Goods Orders for November dropped by 1.1%, far exceeding the anticipated 0.4% decline. Meanwhile, the Conference Board’s Consumer Confidence Index fell to 104.7 in December, a drop of 8.1 points, amid growing concerns over potential tariff impacts under the incoming Trump administration.
Despite these concerns, the Fed’s recent projections for 2025 suggest fewer rate cuts, reflecting caution in response to persistent inflation pressures.
AUD/USD Technical Analysis: Persistent Bearish Trend and Limited Upside
The Australian Dollar remains under pressure, trading around 0.6230 on Tuesday, with the daily chart showing a continued bearish bias. The pair is confined within a descending channel pattern, and the 14-day Relative Strength Index (RSI) is below 30, suggesting that any upward correction may be short-lived.
On the downside, AUD/USD may test support near the lower boundary of the descending channel at 0.6110. To the upside, resistance lies at the nine-day Exponential Moving Average (EMA) at 0.6288, followed by the 14-day EMA at 0.6322. A break above the channel’s upper boundary at 0.6370 could trigger a rally, potentially reaching a nine-week high of 0.6687.
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