AUD/USD Price Analysis: Slumps amid strong USD and weak Australian data

The AUD/USD declined by 0.34% on Thursday, slumping near 0.6170 as the US Dollar gained strength on a persistent inflation outlook in the United States. Investors are eyeing the US Nonfarm Payrolls (NFP) data for December for guidance on the Federal Reserve’s interest rate direction. Meanwhile, the Australian Dollar weakened on the back of moderate growth in local Retail Sales and China’s inflation data.

Fundamental overview

Aussie continues weak after soft mid-tier data from Australia and Chinese inflation figures. On the Australian front, Retail Sales data for November showed growth of 0.8%, below market expectations of 1% but higher than October’s reading of 0.5%. The slower-than-expected growth has strengthened dovish bets on the Reserve Bank of Australia (RBA), with traders fully pricing in a 25-basis point rate cut in the April policy meeting.

Adding to the Aussie’s woes, China’s Consumer Price Index (CPI) for December grew by 0.1% annually, as expected, but slower than the prior reading of 0.2%. Being a proxy for China’s economy, the AUD faced additional pressure from these lackluster inflation figures.

In contrast, the US Dollar remained resilient, supported by expectations of pro-growth and inflationary policies under President-elect Donald Trump. This scenario bolstered the USD as investors anticipate the Federal Reserve to maintain a hawkish stance on monetary policy. The Federal Open Market Committee (FOMC) minutes from December revealed concerns about potential policy changes slowing inflation’s progress towards the 2% target. Market participants await Friday’s NFP report to gauge the labor market’s strength and its implications for the Fed’s interest rate strategy.

Technical overview

The AUD/USD shed ground for a third consecutive day. The Relative Strength Index (RSI) declined sharply to 35, remaining in the negative territory and signaling increasing bearish momentum. Meanwhile, the MACD histogram shows decreasing green bars, further highlighting the pair’s weak outlook.

Bears invalidated the latest bullish recovery attempt, with the pair struggling to overcome resistance at the 20-day Simple Moving Average (SMA). Until this level is cleared, the outlook remains firmly negative. Immediate support is seen near 0.6170, with a break below potentially exposing 0.6150. On the upside, resistance is situated at 0.6230, followed by the 20-day SMA. Without a meaningful recovery above these levels, the AUD/USD remains vulnerable to further declines.