The AUD/USD pair dropped to near 0.6230 during Tuesday’s European session, pressured by the Reserve Bank of Australia (RBA) monetary policy minutes for its December 10 meeting, which were perceived as slightly dovish. The minutes revealed that RBA policymakers are increasingly confident that price pressures are easing in line with their expectations, making it “appropriate” to begin relaxing their stance on monetary policy tightening.
Despite price pressures in Australia easing to 3% in November, they remain above the RBA’s target of 2% and are unlikely to return to this level before 2026. This outlook contributed to the Australian Dollar’s weakness.
Meanwhile, the US Dollar is holding onto its gains in a holiday-affected week with thin trading volumes. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, remains above the key 108.00 level. The US Dollar remains firm due to the Federal Reserve’s cautious approach to interest rate cuts in 2025. The Fed expects only two rate cuts next year, with analysts at UBS projecting these cuts to occur in June and September policy meetings.
The AUD/USD pair is currently trading slightly above its four-year low of 0.6180, and the outlook remains bearish. The 20-week Exponential Moving Average (EMA), around 0.6520, is sloping downward, signaling continued pressure on the Aussie. Additionally, the 14-week Relative Strength Index (RSI) is oscillating between 20.00 and 40.00, reinforcing bearish momentum.
If the AUD/USD pair fails to maintain a recovery above the 0.6200 support level, further downside risks toward the March 6, 2020 low of 0.6120 and the psychological 0.6000 level may materialize. However, if the pair manages to recover above the November 25 high of 0.6550, resistance at the round 0.6600 level, followed by the September 11 low of 0.6622, could come into focus.
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