Daily Price Outlook
During the European trading session, the AUD/USD currency pair has rebounded strongly extending gains for the second consecutive day and recovering from 0.6131, its lowest level since April 2020.
This resurgence is fueled by robust commodity prices and improved global market sentiment, which supported risk-sensitive assets like the AUD.
However, economic challenges persist in Australia. The Westpac Consumer Confidence Index fell for the second month in a row, dropping 0.7% in January to 92.1 points, signaling consumer pessimism.
Meanwhile, markets are factoring in a 75% probability of a rate cut by the Reserve Bank of Australia (RBA) in February, keeping the AUD/USD pair under pressure.
Traders are eyeing the upcoming Australian employment data, which could provide further insights into the RBA’s policy trajectory.
US Dollar Strength and Its Impact on the Pair
On the US front, the broad-based US Dollar continues to exert pressure on the AUD/USD pair, supported by strong economic data and a hawkish outlook from the Federal Reserve.
The US Dollar Index (DXY) remains near 109.60, its highest level since November 2022, reflecting sustained demand for the greenback.
On the data front, the December’s Nonfarm Payrolls (NFP) data exceeded expectations, showing a robust 256,000 job additions, compared to forecasts of 160,000.
This robust labor market data has pushed US Treasury yields higher, with the 2-year yield at 4.42% and the 10-year yield at 4.80%.
Federal Reserve policymakers, including Kansas Fed President Jeffrey Schmid, have emphasized the need for a measured approach to rate cuts in 2025, reinforcing the USD’s strength.
Additionally, the upcoming US Producer Price Index (PPI) report is expected to provide further clarity on inflation trends, which could influence the Fed’s rate decisions and the trajectory of the AUD/USD pair.
China's Economic Stimulus and Its Ripple Effect on AUD/USD Amid Australia's Domestic Challenges
On the other hand, China’s economic developments remain a critical factor influencing the AUD, given Australia’s close trade ties with its largest trading partner.
The People’s Bank of China (PBOC) recently announced measures to support the Chinese Yuan, including raising the macro-prudential adjustment parameter for cross-border financing.
These measures are intended to maintain ample liquidity and stabilize China’s financial markets, indirectly benefiting the AUD through strengthened demand for Australian exports.
PBOC Governor Pan Gongsheng reaffirmed China’s commitment to bolstering the global economy, highlighting plans to utilize fiscal and monetary tools to sustain growth.
This optimism has provided additional support for the AUD/USD pair, as improved Chinese economic conditions typically lead to increased demand for Australian commodities.
Domestically, Australia’s TD-MI Inflation Gauge surged by 0.6% month-over-month in December, the largest monthly increase since 2023, complicating the RBA’s policy outlook.
Despite these challenges, China’s stimulus measures offer some relief for the AUD, underscoring the intertwined economic relationship between the two nations.
AUD/USD – Technical Analysis
The AUD/USD pair is trading at $0.61918, up 0.26%, as the Australian Dollar shows slight recovery amid a stabilizing U.S. Dollar. The price remains below the pivot point at $0.62071, maintaining a bearish tone despite the recent uptick.
Immediate resistance is located at $0.62615, with higher levels at $0.62898 and $0.63274. On the downside, support stands at $0.61781, with deeper thresholds at $0.61488 and $0.61208.
The 50-day EMA at $0.62069 aligns closely with the pivot point, reinforcing its significance as a key decision level. A break above $0.62071 may shift sentiment toward bullishness, potentially targeting the immediate resistance zone.
Conversely, failure to hold above this pivot point could trigger renewed selling pressure, targeting the $0.61480 region.
The Relative Strength Index (RSI) suggests neutral momentum, indicating that the market could go either way depending on the break of key levels.
While the near-term outlook leans bearish, a decisive break above $0.62071 would challenge the prevailing sentiment.
Traders should monitor U.S. economic data and commodity trends, as these remain critical drivers for the Australian Dollar’s trajectory.
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