Daily Price Outlook
During the European trading session, the AUD/USD currency pair continued its losing streak, staying under pressure around the 0.6193 level.
The main reason for its downward rally can be traced to disappointing domestic economic data and concerns about China’s economic outlook.
China's Consumer Price Index (CPI) data, released on Thursday, showed that inflation is facing deflationary risks. In December, the annual inflation only rose by 0.1%, slightly lower than November's 0.2% increase, which aligned with market expectations.
Besides this, traders are awaiting Friday’s US Nonfarm Payroll (NFP) report, as it may provide further direction for US Federal Reserve policy.
The US Dollar (USD) has been supported by hawkish signals from the Federal Open Market Committee (FOMC) meeting minutes and growing concerns over potential tariff plans under the incoming Trump administration.
US Dollar Strengthens Amid Strong Economic Data, While Australian Dollar Faces Pressure from Soft Inflation
On the US front, the broad-based US dollar has been holding strong, with the US Dollar Index (DXY) staying near the 109.00 level.
The Greenback is benefiting from hawkish signals in the Federal Reserve's (Fed) meeting minutes, as well as concerns over tariff plans from the incoming Trump administration. This strength in the dollar is also supported by rising US Treasury bond yields.
Moreover, the US labor market data provided positive signals. Initial Jobless Claims fell to 201,000, better than the expected 218,000. Meanwhile, the ADP Employment report showed a gain of 122K jobs in December, although this was below market expectations of 140K.
The ISM Services PMI also showed strong growth, rising to 54.1 from 52.1, beating the 53.3 forecast. The Prices Paid Index, a key inflation measure, also increased, indicating that inflationary pressures remain present.
Therefore, the strong US Dollar, supported by positive economic data and rising bond yields, puts pressure on the AUD/USD pair, likely causing the Australian Dollar to weaken further against the Greenback.
In contrast, the Australian Dollar (AUD) is facing challenges due to softer inflation data. Australia's core inflation, measured by the trimmed mean, fell to 3.2% annually from 3.5%, bringing it closer to the Reserve Bank of Australia's (RBA) target range of 2-3%. This has led traders to expect a potential interest rate cut from the RBA.
Australia's CPI rose 2.3% year-over-year in November, slightly above expectations, but it remains within the RBA’s target range. Despite this, there is a growing expectation of a rate cut in the coming months.
Hence, the softer inflation data and expectations of an interest rate cut by the RBA are likely to weigh on the Australian Dollar, potentially leading to further weakness in the AUD/USD pair.
AUD/USD – Technical Analysis
AUD/USD is trading at $0.61964, down 0.28%, as bearish sentiment dominates amid global risk-off conditions. The pair is struggling to maintain ground above its pivot point at $0.62190, signaling potential downside risks.
The 50 EMA at $0.62228 has turned into a near-term resistance level, further weighing on the currency pair. The RSI is hovering in bearish territory, reflecting subdued momentum.
Immediate resistance is located at $0.62730, followed by $0.63058 and $0.63393, marking levels to watch for any bullish recovery.
On the downside, immediate support lies at $0.61781, with stronger support at $0.61488 and $0.61208. A sustained move below the pivot point could trigger further selling pressure, targeting the $0.61781 level initially, followed by $0.61530.
Traders considering short positions might look to enter below $0.62172, targeting $0.61530 with a stop-loss at $0.62523.
While the pair remains bearish in the short term, a break above $0.62190 and the 50 EMA could signal a reversal, paving the way for a test of $0.62730.
However, the broader trend remains cautious as the pair reacts to key technical and macroeconomic drivers.
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