The AUD/USD currency pair has seen significant movement, rising to approximately 0.6420 as investors brace for the Reserve Bank of Australia’s monetary policy announcement on Tuesday. Market consensus indicates that the RBA will maintain its current interest rate of 4.35%. Meanwhile, speculations are strong that the Federal Reserve may announce a 25 basis point decrease in its key borrowing rate next week, potentially bringing it down to a range of 4.25% – 4.50%.
After a challenging week, the Australian dollar displayed slight recovery, finding temporary support near 0.6420 following a drop to a four-month low of 0.6370 on Friday. The upcoming policy decision from the RBA is drawing considerable attention, with expectations that the central bank will adopt a more cautious stance due to unexpectedly weak Australian GDP growth for the third quarter. This shift could benefit the Australian dollar in a landscape where rate cuts are anticipated.
Analysts from major financial institutions predict that the RBA may commence rate reductions by May 2025, adjusting their initial timeline due to persistent inflationary pressures. Concurrently, the US dollar has gained traction, despite widespread belief that the Federal Reserve will opt for a rate cut in its upcoming meeting. Investor focus this week will also include the release of US Consumer Price Index data for November, scheduled for Wednesday.
In terms of technical indicators, the short-term outlook for the AUD/USD pair remains bearish, as indicated by declining short-to-long-term Exponential Moving Averages. The 14-day Relative Strength Index sits below 40, reinforcing the prevailing bearish momentum. If the pair cannot maintain recovery above the 0.6400 level, it may face additional downward pressure, potentially revisiting the August low of 0.6348 or the key psychological level of 0.6300. Conversely, a rally beyond the recent high of 0.6550 could signal upward movement towards resistance levels around 0.6600 and beyond.
