The AUD/USD pair saw a sharp recovery from its two-year low of 0.6200 early Thursday, climbing 0.65% to settle near 0.6260. The pair’s rebound was supported by a pause in the US Dollar’s uptrend, driven by hawkish Federal Reserve rate cuts. However, lingering worries about China’s weak economic recovery and potential tariff policies under the Trump administration may limit the Australian Dollar’s upside.
Fundamental overview
After Wednesday’s selloff, the Australian Dollar made a mild recovery. This comes as the US Dollar gained strength following the Federal Reserve’s decision to lower interest rates by 25 basis points (bps) to a range of 4.25%-4.50%. While the move was anticipated, the Fed’s latest guidance hinted at fewer rate cuts in the coming year.
In its updated projections, the Fed reduced its forecast for 2025 rate cuts to two, down from four in its September outlook. Fed Chair Jerome Powell emphasized caution during his press conference, citing persistent uncertainties around inflation and improvements in employment metrics. Powell also acknowledged that monetary policy is nearing a neutral stance, justifying a more measured approach to future adjustments.
On the Australian side, concerns over China’s economic recovery continue to weigh heavily on the Aussie. Recent data from China highlighted weak consumer spending and falling property prices. The outlook remains clouded by expectations of increased tariffs on Chinese goods under the next US administration, which could adversely impact Australia’s economy given its reliance on Chinese trade. These factors have limited the Australian Dollar’s recovery potential.
Technical overview
The AUD/USD climbed 0.65% to 0.6260 on Thursday, supported by oversold technical conditions. The Relative Strength Index (RSI) rebounded sharply to 31, moving away from oversold territory and signaling the potential for further recovery. Meanwhile, the MACD histogram shows diminishing bearish momentum, with rising red bars indicating a potential shift in market sentiment.
While the pair has found some footing, key resistance is located at 0.6280, with a break above this level needed to challenge the psychological 0.6300 barrier. On the downside, immediate support is at 0.6230, with a drop below this level potentially exposing the recent lows near 0.6200.
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