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AUD/USD declines to 0.6215 amid muted trading and RBA dovish tone

The AUD/USD pair traded in a narrow range near the key yearly support of 0.6200 during Friday’s North American session, slipping 0.14% to 0.6215. The muted price action reflects thin trading volumes as markets remain subdued ahead of the New Year celebrations. The pair struggles for direction amid a lack of strong market catalysts, with attention focused on the Reserve Bank of Australia’s (RBA) dovish minutes and a mixed performance from the US Dollar.

Fundamental overview

The Aussie continues soft and struggles to gain traction as RBA’s December meeting minutes highlighted increasing confidence among policymakers that inflationary pressures are easing in line with expectations. The minutes suggested that the current level of monetary policy tightness might soon be relaxed, fueling speculation about a potential rate cut in February. The market has priced in approximately 65% odds of a 25 basis point reduction at the February 18 meeting, with full expectations for a cut by April.

Meanwhile, RBA Governor Michele Bullock emphasized a data-driven approach, declining to confirm scenarios for a February rate adjustment. Bullock reiterated that the Board did not explicitly discuss rate cuts or hikes during the December meeting, keeping options open depending on incoming economic data.

On the US side, the Dollar edged lower, with the Dollar Index (DXY) struggling to maintain the 108.00 level. The Greenback’s broader outlook remains firm, supported by the Federal Reserve’s cautious stance on future rate cuts. Fed Chair Jerome Powell recently emphasized that further reductions hinge on tangible progress in curbing inflation. Policymakers also flagged incoming immigration, tariff, and tax policies under the new US administration as potential inflationary risks.

Technical overview

The AUD/USD extended its losses as technical indicators remain in oversold territory. The Relative Strength Index (RSI) stands at 27, mildly declining, signaling persistent bearish momentum. The MACD histogram prints flat red bars, reflecting a lack of strong directional cues.

Immediate support lies at 0.6200, with a break below this level potentially exposing further downside toward 0.6170. On the upside, resistance is seen at 0.6250, followed by a more significant barrier at 0.6280. While the pair’s technicals suggest limited selling pressure, a rebound remains contingent on a shift in market sentiment and improved risk appetite.
 

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Author

Patricio Martín

Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.

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