The AUD/USD pair has dropped to near 0.6230 during Tuesday’s European session. The Australian Dollar (AUD) is under pressure as the Reserve Bank of Australia (RBA) monetary policy minutes from the December 10 meeting came across as slightly dovish.
RBA’s Stance
The minutes revealed that RBA policymakers are confident that price pressures in Australia are easing as expected. This has led them to think it’s “appropriate for them” to start relaxing the “degree of monetary policy tightness”. Although price pressures have eased to 3% in November, they’re still higher than the RBA’s target of 2% and aren’t likely to return to the target before 2026.
US Dollar’s Strength
Gains Amid Thin Trading
Meanwhile, the US Dollar (USD) is holding onto gains in a week that’s been curtailed by holidays and has thin trading volumes. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is clinging to gains above 108.00.
Fed’s Influence
The Greenback remains firm because the Federal Reserve (Fed) has indicated a gradual interest rate cut approach for 2025. The Fed anticipates only two interest rate cuts next year, which analysts at UBS project will happen in policy meetings in June and September.
Outlook for AUD/USD
Bearish Signals
The AUD/USD pair trades slightly above the four-year low of 0.6180. The outlook for the pair is bearish as the 20-week Exponential Moving Average (EMA), which is currently around 0.6520, is sloping downwards. Additionally, the 14-week Relative Strength Index (RSI) is oscillating between 20.00 and 40.00, suggesting that bearish momentum remains intact.
Potential Downside and Upside Scenarios
If the Aussie pair fails to maintain its recovery above the round-level support of 0.6200, there could be more downside. It might then head towards the 6 March 2020 low of 0.6120 and the psychological support of 0.6000. On the other hand, if there’s a decisive recovery above the November 25 high of 0.6550, it would drive the asset towards the round-level resistance of 0.6600, followed by the September 11 low of 0.6622.
In conclusion, with the RBA’s dovish stance and the Fed’s gradual rate cut approach influencing the AUD/USD pair, the current bearish outlook could see the pair decline further below 0.6200. However, market conditions can change, and traders will be closely watching key levels to see which direction the pair takes in the coming days and weeks.
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