- AUD/USD falls sharply to near 0.6500 due to a strong recovery in the US Dollar.
- Market expectations for Fed rate cuts in December have slightly eased.
- AUD/USD falls back after failing to climb above 38.2% Fibo retracement at 0.6535.
The AUD/USD pair drops sharply to near the psychological support of 0.6500 in the North American trading session on Wednesday. The Aussie pair weakens as the US Dollar (USD) bounces back strongly as traders doubt whether the Federal Reserve (Fed) will cut interest rates again in the December meeting. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rebounds to near 106.60.
The probability of the Fed cutting interest rates by 25 basis points (bps) to 4.25%-4.50% in December has diminished to 56% from 83% a week ago, according to the CME FedWatch tool.
Market speculation for Fed interest rate cuts in December has slightly diminished as investors expect President-elect Donald Trump’s economic agenda will boost United States (US) inflation and economic outlook.
The Australian Dollar (AUD) performs weakly even though the Reserve Bank of Australia (RBA) is expected to keep interest rates unchanged at 4.35% by the year-end. RBA Governor Michelle Bullock maintained hawkish guidance in her remarks in the press conference after the policy decision on November 5, remaining cautioned about upside risks to inflation.
AUD/USD retreats after failing to extend recovery above 38.2% Fibonacci retracement around 0.6535. The Fibo tool is plotted from the November 7 high of 0.6688 to the November 14 low of 0.6440 on an hourly timeframe. The asset wobbles around the 50-day Exponential Moving Average (EMA) near 0.6500.
The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range suggesting a sideways trend.
A decisive recovery move above the intraday high of 0.6545 could push the asset towards the round-level resistance of 0.6600, followed by the November 5 high of 0.6645.
In an alternate scenario, the pair could witness a downside after sliding below the November 14 low of 0.6440, which would drag the asset toward the round-level support of 0.6400 and the August low of 0.6348
AUD/USD hourly chart
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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
AUD/USD drifts lower toward 0.6300; looks to US NFP for fresh impetus
AUD/USD heads toward 0.6300 early Friday, resuming the pullback from near 0.6400. The pair remains on a slippery slope despite a weaker US Dollar. US-China trade tensions and increased odds of Trump's tariffs-led global recession undermine the risk-sensitive Aussie. All eyes on US NFP and Powell.
USD/JPY holds recovery near 146.00; upside seems limited ahead of US NFP
USD/JPY trades close to 146.00, holding its recovery in the Asian session on Friday. Investors dial down bets of aggressive BoJ rate hikes, amid worries that Trump's new tariffs could negatively impact Japan's economy, helps the pair sustain its latest upswing. But buyers remain wary ahead of US NFP and Powell.
Gold: Will Powell and Payrolls drive the next leg higher?
Gold price is taking a breather early Friday after witnessing a volatile trading day on Thursday. Traders are consolidating the weekly gains, slightly away from the record high of $3,168, bracing for the US Nonfarm Payrolls report and US Federal Reserve Chair Jerome Powell’s speech for a fresh directional impetus.
What to expect from Bitcoin and XRP following Trump tariffs: Experts weigh in
Bitcoin stretched its decline on Thursday, briefly dropping below $83,000 as President Trump's newly announced reciprocal tariffs extended the crypto market downturn by over 4%. The sustained decline and high volatility highlight Bitcoin's increasing risk to macroeconomic uncertainties.
Trump’s “Liberation Day” tariffs on the way
United States (US) President Donald Trump’s self-styled “Liberation Day” has finally arrived. After four straight failures to kick off Donald Trump’s “day one” tariffs that were supposed to be implemented when President Trump assumed office 72 days ago, Trump’s team is slated to finally unveil a sweeping, lopsided package of “reciprocal” tariffs.
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.