Breaking Down the AUD/USD Movement
- AUD/USD broke decisively below the 0.6400 support on Tuesday.
- The US Dollar remained well bid ahead of the release of US CPI.
- The RBA delivered a dovish hold at its event early on Tuesday.
The US Dollar (USD) continued its uptrend on Tuesday, pushing the Dollar Index (DXY) to multi-day highs above 106.60. On the other hand, the Australian Dollar (AUD) faced further downside pressure, breaking below the 0.6400 support level and potentially targeting the year-to-date lows near 0.6350.
What’s Behind the Aussie’s Decline?
The recent struggles of the Australian Dollar can be attributed to weak GDP data from the July–September quarter, falling short of expectations. Additionally, the Reserve Bank of Australia (RBA) maintained its policy rate but adopted a dovish stance, hinting at a potential rate cut in February.
Furthermore, declining prices for key exports like copper, amid mixed signals from the Chinese economy, have added to the downward pressure on the Aussie Dollar.
The RBA’s Policy Shift
The RBA’s decision to keep rates unchanged but signal a possible rate cut in the future has contributed to market uncertainty. Governor Michele Bullock’s cautious approach and lack of clear guidance on future policy moves have left investors on edge.
AUD/USD Outlook: Challenges and Opportunities
The path ahead for AUD/USD is fraught with obstacles and opportunities. While a potential shift in US Federal Reserve policy could support the Aussie, factors like US inflation, USD strength, and China’s economic slowdown pose challenges.
Key Technical Indicators:
- Immediate resistance at 0.6549, with support levels at 0.6399 and 0.6347.
- Momentum indicators suggest increasing negative momentum.
Key Data to Watch
Upcoming data releases, including the Australian labor market report on December 12, will be crucial in shaping AUD/USD movements.
Bottom Line
The Australian Dollar faces a challenging environment, influenced by domestic and global factors. The timing of the RBA’s rate cut decision and data releases from key economies will play a significant role in determining the currency’s future trajectory.
Analysis:
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