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AUD Weakens as RBA’s Cautious Stance and Fed’s Rate Outlook Weigh on Sentiment

Elena by Elena
25/12/2024
in RBA
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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.

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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.

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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.

Related Topics:

  • Current AUD Exchange Rate: $44 Australian Dollars in Pounds
  • Current AUD Exchange Rate: $100 Australian Dollars in Pounds
  • Current AUD Exchange Rate: $45 AUD in USD?
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Elena

Elena

Elena, a seasoned foreign exchange trader with a proven track record in the dynamic world of currency markets, brings a wealth of expertise and professionalism to the financial realm. With an extensive background spanning over a decade, she has honed her skills in analyzing global economic trends and implementing strategic trading solutions. Known for her meticulous attention to detail and analytical prowess, Elena has navigated through volatile market conditions with finesse, consistently delivering impressive results for her clients. Her comprehensive understanding of macroeconomic indicators, coupled with a keen awareness of geopolitical events, allows her to make informed decisions that optimize trading portfolios. Elena's commitment to staying ahead of the curve is evident in her continuous pursuit of knowledge and mastery of cutting-edge trading technologies. Her disciplined approach to risk management ensures prudent investment strategies, instilling confidence in both colleagues and clients alike.

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The NZD/USD pair extended its pullback on Thursday, slipping from the recent one-week high around 0.5965-0.5970 to trade near 0.5920...

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