The Australian Dollar (AUD) experienced a decline against the US Dollar (USD) for the second consecutive day. This dip comes in response to the Reserve Bank of Australia’s (RBA) December Meeting Minutes, which suggested a potential shift in monetary policy as early as February. While the RBA expressed growing confidence regarding inflation trends, it also acknowledged that risks remain. The bank emphasized maintaining a “sufficiently restrictive” stance until there is clearer evidence of inflation stability.
In the minutes, the RBA board noted that if forthcoming economic data aligns with or falls below existing forecasts, it might indicate that conditions are conducive for easing monetary restrictions. However, stronger-than-expected results could necessitate an extension of the current restrictive policy. The robustness of the labor market was highlighted as a key factor in the RBA’s cautious approach compared to other countries that have expedited monetary easing processes.
Conversely, the US Dollar has rallied following a period of decline. Federal Reserve policymakers indicated a reduced expectation for interest rate cuts in 2025, attributing this to a slowdown in the disinflation process. Despite some soft data, particularly the weaker than anticipated Durable Goods Orders — which fell by 1.1% in November against a predicted 0.4% decline — the outlook remains mixed. Markets are currently pricing in a high likelihood that the Federal Reserve will keep interest rates steady at their next meeting, maintaining the range of 4.25% to 4.50%.
The AUD/USD pair is trading around 0.6230, and analysts are observing a consistent bearish trend characterized by a descending channel pattern. A potential test of the lower boundary near 0.6110 is anticipated if the current trend continues. Resistance levels to watch include the nine-day Exponential Moving Average at 0.6288 and the 14-day EMA at 0.6322, with a significant challenge present at the upper boundary of the descending channel around 0.6370. A breakout above this channel could pave the way for a recovery towards the nine-week high of 0.6687.
