The Australian Dollar has managed to recover its daily losses. This happened after the release of Consumer Inflation Expectations on Thursday. Australia’s Consumer Inflation Expectations went up to 4.2% in December from 3.8% in the previous month.
Impact of US Dollar’s Movement
The US Dollar surged. The Federal Reserve made a hawkish cut of 25 basis points at its December meeting. This led to the appreciation of the US Dollar. As a result, the AUD/USD pair declined. The Fed’s benchmark lending rate is now in the range of 4.25%-4.50%, a two-year low.
Australian Inflation and Rate Cut Expectations
Australia’s Consumer Inflation Expectations reached a high level since September. But the Australian Dollar is facing difficulties. There is an increased chance that the Reserve Bank of Australia will cut interest rates sooner and more than expected. Future decisions will depend on data and evolving risk assessments.
US Economic Projections and Fed’s Stance
The US Dollar appreciated. The Summary of Economic Projections showed only two rate cuts in 2025, fewer than the four projected in September. Fed Chair Jerome Powell said the Fed will be careful about further cuts as inflation is still above the 2% target.
Key Economic Data to Watch
Traders will keep an eye on the US weekly Initial Jobless Claims, Existing Home Sales, and the final reading of Gross Domestic Product Annualized for the third quarter.
Australian Dollar’s Downward Pressure
National Australia Bank maintains its forecast for the first RBA rate cut in May 2025, though February is also a possibility. Australia’s Westpac Consumer Confidence fell in December. In the US, Retail Sales had some changes in November. Reuters reported that China is set to target around 5% economic growth in 2025. China’s foreign exchange regulator reported a net outflow from capital markets in November. The preliminary S&P Global US Composite PMI and its components had some movements in December. Chinese authorities plan to raise the fiscal deficit target next year, which affects the AUD as China is Australia’s largest trading partner.
Australian Dollar’s Technical Analysis
The AUD/USD pair trades near 0.6220. The daily chart shows a bearish bias with a descending channel pattern. The 14-day RSI is below 30, indicating an oversold situation and a possible upward correction. The pair may find support around 0.6140. On the upside, initial resistance could be around 0.6326 (nine-day EMA), followed by 0.6362 (14-day EMA) and 0.6400 (descending channel’s upper boundary). A breakout above the channel could lead to the eight-week high at 0.6687.
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