Australian Dollar struggles near multi-year lows as USD strength dominates

The AUD/USD declined by 0.55% to 0.6165 on Friday, hanging near multi-year troughs as a hawkish Federal Reserve and elevated US bond yields after a strong US Nonfarm Payrolls (NFP) from December supported the US Dollar. Bearish sentiment around the Australian Dollar was exacerbated by US-China trade tensions and growing expectations for an early Reserve Bank of Australia (RBA) rate cut. 

Fundamental overview

Aussie continues weak after a stellar US jobs report. The US Bureau of Labor Statistics (BLS) revealed that the economy created 256,000 jobs in December, significantly exceeding forecasts of 160,000. November’s job creation was revised downward from 227,000 to 212,000. Private hiring accounted for 223,000 of the new jobs, further underscoring the labor market’s strength.

The Unemployment Rate dipped to 4.1%, while Average Hourly Earnings (AHE) edged lower from 4% to 3.9%, indicating slight moderation in wage growth. Following the robust data, market participants adjusted their expectations for Federal Reserve rate cuts, with only one reduction anticipated in 2025. The US 10-year Treasury yield briefly surged to around 4.80%, providing additional support to the US Dollar.

The US Dollar Index (DXY) climbed near 110.00, its highest level since November 2022. Elevated Treasury yields, geopolitical risks, and concerns over President-elect Donald Trump’s tariff policies continued to bolster the Greenback. Meanwhile, the Australian Dollar suffered as bets for an RBA rate cut intensified this week, driven by weaker inflation and China’s ongoing economic challenges.

Technical overview

The AUD/USD plunged below 0.6150 on Friday, marking its lowest level since April 2020. The Relative Strength Index (RSI) dropped to 27, entering oversold territory and declining sharply, suggesting extended bearish momentum. The MACD histogram printed rising red bars, indicating increasing downward pressure.

Immediate support lies at 0.6150, with a decisive break exposing the 0.6100 psychological level. On the upside, resistance is seen near 0.6200, followed by 0.6250. Despite the pair’s oversold conditions, the fundamental backdrop and technical indicators imply that any recovery attempts may face strong selling pressure, leaving the outlook firmly bearish.