- AUD/USD retreats after touching a nearly two-week high earlier this Monday.
- Bets for slower Fed rate cuts act as a tailwind for the USD and weigh on the pair.
- The risk-on mood and the RBA’s hawkish stance do little to inspire the AUD bulls.
The AUD/USD pair attracts some intraday sellers in the vicinity of mid-0.6500s, or a nearly two-week high touched earlier this Monday and fills a major part of its bullish gain opening during the early European session. The initial market reaction to Scott Bessent's nomination as US Treasury Secretary turned out to be short-lived in the wake of firming expectations for a less dovish Federal Reserve (Fed). Investors seem convinced that US President-elect Donald Trump’s expansionary policies will reignite inflation and force the Fed to cut interest rates slowly. This helps limit the USD profit-taking slide from its highest level since November 2022 and turns out to be a key factor exerting some downward pressure on the currency pair.
Meanwhile, a combination of factors boosts investors' confidence, albeit does little to offer any support to the risk-sensitive Australian Dollar (AUD) or the AUD/USD pair. Media reports suggest that Israel and the Lebanon-based Hezbollah militant group are on the cusp of a ceasefire deal. Adding to this, expectations that Bessent take a more phased approach on tariffs in an attempt to rein in the budget deficit further fuel the post-US election risk-on rally across the global equity markets. Even the Reserve Bank of Australia's (RBA) hawkish stance fails to inspire Aussie bulls. This suggests that the path of least resistance for the currency pair is to the downside and that the recent bounce from a multi-month low has run out of steam.
The USD bulls, however, might refrain from placing aggressive bets on the back of a sharp fall in the US Treasury bond yields, triggered by Bessent's conservative views on fiscal policy. Investors might also prefer to wait for the release of the minutes from the November FOMC meeting, the first revision of the US Q3 GDP print and the US Personal Consumption and Expenditure (PCE) Price Index data later this week. Investors will also confront the release of Australian consumer inflation figures on Wednesday. Apart from this, comments from influential Fed officials will be scrutinized for cues about the future rate-cut path, which, in turn, will drive the USD demand and provide some meaningful impetus to the AUD/USD pair.
Technical Outlook
From a technical selling, acceptance below the 0.6500 psychological mark could drag the AUD/USD pair back towards the 0.6440 area, or its lowest level since August touched earlier this month. Some follow-through selling could expose the 0.6400 mark, below which spot prices could aim to challenge the August monthly swing low, around the 0.6350-0.6345 region.
On the flip side, the Asian session high, around mid-0.6500s, now seems to act as an immediate hurdle. A sustained strength beyond might trigger a short-covering rally and lift the AUD/USD pair beyond the 0.6600 mark, towards the 200-day Simple Moving Average (SMA) hurdle near the 0.6625-0.6630 region. The momentum could extend further towards the 0.6675 confluence – comprising 50-day and 100-day SMA – before spot prices make a fresh attempt to conquer the 0.6700 mark.
AUD/USD daily chart
(This story was corrected on November 25 at 10:48 GMT to say that some follow-through selling below 0.6400 could aim to challenge the 0.6350-0.6345 region, not the 0.4345 region.)
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