AUD/USD Price Forecast: Seems vulnerable on RBA’s dovish tilt, Death Cross
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UPGRADE- AUD/USD drops back closer to a multi-month low after RBA’s slight dovish shift.
- China’s economic woes and trade war fears further exert pressure on the Aussie.
- Bets for a less dovish Fed favor the USD bulls and support prospects for deeper losses.
The AUD/USD pair comes under some renewed selling pressure on Tuesday and dropped back below the 0.6400 mark, closer to its lowest level since August 5 touched last week after the Reserve Bank of Australia (RBA) announced its policy decision. As was widely expected, the Australian central bank left the Official Cash Rate (OCR) unchanged at 4.35%, though removed its hawkish bias. In the accompanying policy statement, the RBA noted that the board has gained some confidence that inflation was heading back towards its 2% to 3% annual target. Moreover, the central bank omitted the previous line that policy needs to remain restrictive, which, in turn, raised expectations for an early interest rate cut and weighed heavily on the Australian Dollar (AUD). The markets are now pricing in more than a 50% chance of a rate cut at the February RBA meeting.
Meanwhile, China's Trade Balance unexpectedly rose from $95.27 billion to $97.44 billion in November. However, disappointing readings on exports, which slowed sharply from the 12.7% year-on-year growth seen in October to 6.7%, and a 3.9% fall in imports suggested that the overseas and local demand remained sluggish. This added to worries about a fragile recovery in the world's second-largest economy and turned out to be another factor that contributed to driving flows away from the China-proxy Aussie. That said, signals of more stimulus measures from China held back traders from placing aggressive bearish bets around the AUD/USD pair. During a Politburo meeting on Monday, China's government committed to implementing more proactive fiscal measures and moderately looser monetary policy in 2025 as part of efforts to boost domestic consumption. Furthermore, a modest US Dollar (USD) downtick, led by suppressed US Treasury bond yields, offers support to the currency pair and helps limit further losses.
The closely watched US Nonfarm Payrolls (NFP) report released on Friday reaffirmed market bets that the Federal Reserve (Fed) will lower borrowing costs again at the December policy meeting. This, in turn, keeps a lid on the overnight bounce in the US Treasury bond yields and fails to assist the USD Index (DXY), which tracks the Greenback against a basket of currencies, to capitalize on its post-NFP bounce from a nearly one-month low. The USD bulls also seem reluctant and opt to wait for the release of the US consumer inflation figures. Any meaningful downfall for the buck, however, seems elusive on the back of rising bets that the Fed will adopt a cautious stance on cutting interest rates amid expectations that US President-elect Donald Trump's policies will boost inflation. Apart from this, concerns about Trump's tariff plans and US-China trade war fears suggest that the path of least resistance for the AUD/USD pair remains to the downside.
Technical Outlook
From a technical perspective, the AUD/USD pair now seems to have found acceptance below the 0.6400 mark. Some follow-through selling below the multi-month low, around the 0.6375-0.6370 area, will be seen as a fresh trigger for bearish traders and pave the way for deeper losses amid the formation of a 'Death Cross' on the daily chart. Moreover, oscillators on the daily chart are holding deep in negative territory and are still away from being in the oversold zone. This, in turn, suggests that spot prices could aim to challenge the year-to-date low, around the 0.6350-0.6345 region touched in August. The downward trajectory could extend further towards the 0.6300 mark en route to the 2023 swing low, around the 0.6270-0.6265 region.
On the flip side, any attempted recovery back above the 0.6400 mark now seems to face stiff resistance near the 0.6440 region ahead of the overnight swing high, around the 0.6470 area. This is followed by the 0.6500 psychological mark, which if cleared might trigger a short-covering rally and lift the AUD/USD pair beyond the 0.6535-0.6540 supply zone, towards the 0.6600 round figure. The next key barrier is pegged near the 0.6625-0.6630 confluence – comprising the 200- and the 50-day Simple Moving Averages (SMAs). The latter should act as a key pivotal point and if cleared decisively, might shift the bias in favor of bullish traders.
AUD/USD daily chart
- AUD/USD drops back closer to a multi-month low after RBA’s slight dovish shift.
- China’s economic woes and trade war fears further exert pressure on the Aussie.
- Bets for a less dovish Fed favor the USD bulls and support prospects for deeper losses.
The AUD/USD pair comes under some renewed selling pressure on Tuesday and dropped back below the 0.6400 mark, closer to its lowest level since August 5 touched last week after the Reserve Bank of Australia (RBA) announced its policy decision. As was widely expected, the Australian central bank left the Official Cash Rate (OCR) unchanged at 4.35%, though removed its hawkish bias. In the accompanying policy statement, the RBA noted that the board has gained some confidence that inflation was heading back towards its 2% to 3% annual target. Moreover, the central bank omitted the previous line that policy needs to remain restrictive, which, in turn, raised expectations for an early interest rate cut and weighed heavily on the Australian Dollar (AUD). The markets are now pricing in more than a 50% chance of a rate cut at the February RBA meeting.
Meanwhile, China's Trade Balance unexpectedly rose from $95.27 billion to $97.44 billion in November. However, disappointing readings on exports, which slowed sharply from the 12.7% year-on-year growth seen in October to 6.7%, and a 3.9% fall in imports suggested that the overseas and local demand remained sluggish. This added to worries about a fragile recovery in the world's second-largest economy and turned out to be another factor that contributed to driving flows away from the China-proxy Aussie. That said, signals of more stimulus measures from China held back traders from placing aggressive bearish bets around the AUD/USD pair. During a Politburo meeting on Monday, China's government committed to implementing more proactive fiscal measures and moderately looser monetary policy in 2025 as part of efforts to boost domestic consumption. Furthermore, a modest US Dollar (USD) downtick, led by suppressed US Treasury bond yields, offers support to the currency pair and helps limit further losses.
The closely watched US Nonfarm Payrolls (NFP) report released on Friday reaffirmed market bets that the Federal Reserve (Fed) will lower borrowing costs again at the December policy meeting. This, in turn, keeps a lid on the overnight bounce in the US Treasury bond yields and fails to assist the USD Index (DXY), which tracks the Greenback against a basket of currencies, to capitalize on its post-NFP bounce from a nearly one-month low. The USD bulls also seem reluctant and opt to wait for the release of the US consumer inflation figures. Any meaningful downfall for the buck, however, seems elusive on the back of rising bets that the Fed will adopt a cautious stance on cutting interest rates amid expectations that US President-elect Donald Trump's policies will boost inflation. Apart from this, concerns about Trump's tariff plans and US-China trade war fears suggest that the path of least resistance for the AUD/USD pair remains to the downside.
Technical Outlook
From a technical perspective, the AUD/USD pair now seems to have found acceptance below the 0.6400 mark. Some follow-through selling below the multi-month low, around the 0.6375-0.6370 area, will be seen as a fresh trigger for bearish traders and pave the way for deeper losses amid the formation of a 'Death Cross' on the daily chart. Moreover, oscillators on the daily chart are holding deep in negative territory and are still away from being in the oversold zone. This, in turn, suggests that spot prices could aim to challenge the year-to-date low, around the 0.6350-0.6345 region touched in August. The downward trajectory could extend further towards the 0.6300 mark en route to the 2023 swing low, around the 0.6270-0.6265 region.
On the flip side, any attempted recovery back above the 0.6400 mark now seems to face stiff resistance near the 0.6440 region ahead of the overnight swing high, around the 0.6470 area. This is followed by the 0.6500 psychological mark, which if cleared might trigger a short-covering rally and lift the AUD/USD pair beyond the 0.6535-0.6540 supply zone, towards the 0.6600 round figure. The next key barrier is pegged near the 0.6625-0.6630 confluence – comprising the 200- and the 50-day Simple Moving Averages (SMAs). The latter should act as a key pivotal point and if cleared decisively, might shift the bias in favor of bullish traders.
AUD/USD daily chart
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