- AUD/USD traded in a vacillating note just above the 0.6200 mark.
- The US Dollar weakened once again on data, dovish comments.
- The Australian labour market came in on a strong note in December.
The US Dollar (USD) seesawed on Thursday, with the US Dollar Index (DXY) dipping below 109.00 in response to discouraging United States (US) data releases and dovish remarks from the Federal Reserve's (Fed) Waller. Meanwhile, the Australian Dollar (AUD) faltered once again in the mid-0.6200s, ending the day marginally on the defensive after three consecutive daily advances.
What's driving the Australian Dollar's rebound?
Although the Australian Dollar has struggled against the strong US Dollar, it has regained some ground recently, helped by a slight pullback in the Greenback. The US Dollar's rally, which began in October alongside the so-called "Trump trade," had significantly pressured the Aussie.
Domestically, the Reserve Bank of Australia (RBA) is considering a February rate cut as it grapples with slow economic growth and easing inflationary pressures. Market expectations of a cut are currently around 60%.
Further weighing on the Aussie were some loss of momentum in domestic fundamentals and confidence gauges, as well as concerns over China’s slowing economy, which is critical for Australian exports. Tepid commodity prices have added to these challenges.
On Thursday, December’s Australian jobs report printed quite a rosy picture after the Employment Change increased more than expected by 56.3K individuals, although the jobless rate ticked a tad higher to 4.0% (from 3.9%). Additional data Down Under saw the Consumer Inflation Expectations ease to 4.0% in January (from 4.2%), according to the Melbourne Institute.
Market signals: RBA remains cautious
At its December meeting, the RBA left rates unchanged at 4.35% but hinted at possible cuts in the future, citing signs of easing inflation. RBA Governor Michele Bullock stressed that upcoming decisions will depend heavily on economic data.
Challenges and opportunities for AUD/USD
The AUD/USD pair faces headwinds from a dominant US Dollar, weak domestic fundamentals, and China’s lacklustre recovery. However, the pair could benefit if the Federal Reserve signals an ongoing rate-cutting cycle, which might weaken the USD.
Technical outlook
AUD/USD remains vulnerable, with critical support at 0.6130. A break below this level could see the pair drop to the psychologically significant 0.6000 mark. On the upside, resistance is seen at 0.6301, with additional barriers at 0.6401 and 0.6549. Momentum indicators are mixed; the RSI looks stuck in the middle of the range around 42, but the ADX above 33 still points to some strength in the trend.
AUD/USD daily chart
What to watch this week
Market attention now shifts to the release of key data in China on Friday, which could influence the AUD’s price action.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD accelerates losses to 1.0930 on stronger Dollar
The US Dollar's recovery regains extra impulse sending the US Dollar Index to fresh highs and relegating EUR/USD to navigate the area of daily troughs around 1.0930 in the latter part of Friday's session.
GBP/USD plummets to four-week lows near 1.2850
The US Dollar's rebound keep gathering steam and now sends GBP/USD to the area of multi-week lows in the 1.2850 region amid the broad-based pullback in the risk-associated universe.
Gold trades on the back foot, flirts with $3,000
Gold prices are accelerating their daily decline, steadily approaching the critical $3,000 per troy ounce mark as the Greenback's rebound gains extra momentum and US yields tighten their retracement.
Can Maker break $1,450 hurdle as whales launch buying spree?
Maker holds steadily above $1,250 support as a whale scoops $1.21 million worth of MKR. Addresses with a 100k to 1 million MKR balance now account for 24.27% of Maker’s total supply. Maker battles a bear flag pattern as bulls gather for an epic weekend move.
Strategic implications of “Liberation Day”
Liberation Day in the United States came with extremely protectionist and inward-looking tariff policy aimed at just about all U.S. trading partners. In this report, we outline some of the more strategic implications of Liberation Day and developments we will be paying close attention to going forward.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.