The Australian Dollar (AUD) saw a slight recovery on Tuesday, rising from 0.6130—the lowest level since April 2020—to 0.6180, supported by strong commodity prices and a marginal improvement in market sentiment. However, despite this modest rebound, the currency remains under pressure, facing headwinds from a dovish Reserve Bank of Australia (RBA) stance and a cloudy domestic economic outlook.
Market Overview: US Data Weakens Dollar, Offering Temporary Relief for AUD
The US Dollar Index (DXY) retreated after Monday’s gains, maintaining a firm overall tone due to expectations that the Federal Reserve will likely hold rates steady in January. December’s Producer Price Index (PPI) data revealed a 3.3% year-over-year rise, slightly below the anticipated 3.4%, while core PPI came in at 3.5%, also under projections. Following the release, US Treasury yields softened, benefiting the AUD/USD pair, but the broader USD outlook remains robust.
Looking ahead, Wednesday’s Consumer Price Index (CPI) data will be pivotal in determining the pair’s near-term direction.
Technical Outlook: AUD/USD Remains Near Oversold Levels
The Relative Strength Index (RSI) has risen sharply to 42, though it remains in negative territory, suggesting only limited bullish momentum. The Moving Average Convergence Divergence (MACD) histogram is printing flat red bars, indicating minimal relief for buyers. While the Australian Dollar has managed to halt its recent downtrend, it continues to hover near April 2020 lows. A sustained recovery would likely require a decisive break above the 20-day Simple Moving Average (SMA), which is currently acting as a barrier to further upside movement.
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