AUD/USD Faces Pressure Amid RBA Uncertainty 

The Australian Dollar has trended downwards against the U.S. Dollar, resulting from tariff threats, dovish sentiment from the Reserve Bank of Australia (RBA), and hawkish signals from the Fed. As a result, markets have shown increasing demand for the USD. 

Uncertainty From The RBA 

The Reserve Bank of Australia has kept rates steady at 4.35% at their previous meeting and indicated that the central bank is confident that inflation is moving sustainably towards their target range of 2% to 3%. 

Consumer confidence in Australia fell for the second month in January, driven by the Australian Dollar’s depreciation against the U.S. Dollar and concerns over economic stability.  

Negative sentiment surrounding interest rates and the broader economy has increased, with markets pricing in a 67% chance of a 25-bps rate cut by the RBA in February and another move fully priced in for April. (Source: Reuters) 

Recent threats of increased U.S. tariffs, particularly those proposed by President-elect Donald Trump, have exerted downward pressure on the Australian Dollar. Concerns over potential trade tensions and their impact on global economic stability have led to a depreciation of the Aussie Dollar, which is sensitive to shifts in international trade policies.  

The weakening Aussie Dollar could see import prices rise, which might add further pressure on the RBA to keep the official cash rate on hold in their next meeting. 

Labor data from Australia will be released on Thursday, January 16, which will provide stronger insights on the labor market’s condition.  

A larger-than-expected increase in job changes could signal a pickup in employment. A tighter labor market may fuel consumer spending and demand-driven inflation. This could delay an RBA rate cut, supporting Aussie dollar demand. Conversely, weak job changes may reinforce dovish RBA expectations. 

Potential trade tensions, particularly between the U.S. and China, could further impact the Australian Dollar due to Australia’s economic ties with China. 

U.S. Dollar Continues to Triumph 

The U.S. Dollar’s recent strength has been fueled by better-than-expected data, including Nonfarm Payrolls and the services sector Purchasing Managers’ Index. These positive indicators have led to a decline in the number of expectations of Federal Reserve rate cuts this year, with the rise in U.S. bond yields which supported the USD. 

Donald Trump returns to the White House on Monday. His plans for import tariffs, tax cuts and immigration restrictions could fuel inflation, adding to expectations of a less aggressive easing cycle. 

US CPI will be released on Wednesday, January 15 with forecasts of 2.9% YoY, and 0.3% MoM. For Core CPI, the data is forecasted at an increase of 0.2% MoM in December. Hotter than expected inflation might fuel demand in the U.S. Dollar, with the potential drive AUD/USD lower. (Source: Acuity) 

Conversely, a soft inflation report could reignite expectations of more Fed rate cuts and might cause currencies against the U.S. Dollar to rally. 

Technical Analysis 

Source: TradingView 

AUD/USD has been trending downwards with strong bearish sentiment dominating the currency pair which formed new lows. Price looks to be under bearish control with the 65 and 200 EMAs driving the price towards the downside.   

If bears continue to dominate, traders might monitor the 0.60900 level as a new potential support. Alternatively, if price can rise above 0.62000, bulls may look to push price to the upside, where resistance around 0.62500 may be formed.   

The information provided is not intended to serve as investment advice or a sufficient basis for making investment decisions. It is meant solely for informational purposes.

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