The Australian Dollar is experiencing a decline as traders adopt a cautious stance ahead of the upcoming Reserve Bank of Australia (RBA) Interest Rate Decision. Speculation indicates that the RBA is likely to maintain the Official Cash Rate at 4.35% during its last policy meeting of the year this Tuesday. Meanwhile, the US Dollar continues to strengthen as the market anticipates the release of the US Consumer Price Index data on Wednesday.
The RBA’s cautious outlook is influenced by core inflation remaining persistently high, coupled with a tight labor market. Recent statements by RBA officials suggest that inflation is not expected to reach the central bank’s target range sustainably until 2026, indicating an unlikely scenario for interest rate cuts in the near future. Traders are closely monitoring these developments to gauge shifts in monetary policy.
Meanwhile, recent labor market data from Australia shows that the unemployment rate held steady at 4.1% in October, with a net increase of 15,900 jobs. Despite a slowdown in the annual Trimmed Mean Consumer Price Index to 3.5% from 4.0%, inflation continues to exceed the RBA’s 2% to 3% target, fueling concerns about economic stability. Australia’s economy also faced challenges, growing at its slowest annual pace since the pandemic, expanding by only 0.3% in the third quarter.
In global markets, the US added 227,000 jobs in November, surpassing expectations, while wage growth remained stable, supporting a sustained economic recovery. Additionally, there is positive sentiment surrounding China, where leaders have proposed fiscal stimulus measures to boost domestic consumption in 2024, despite recent weak inflation data.
From a technical perspective, the Australian Dollar has dipped below 0.6450, marking a five-month low. Current trading data shows the AUD/USD pair hovering around 0.6420, within a downward trend channel. A decisive breach below 0.6434 could suggest further declines towards the yearly low of 0.6348, while immediate resistance is positioned at the nine-day Exponential Moving Average around 0.6449. A breakout above this resistance could signal a potential upward movement toward recent highs.
