FX.co ★ AUD/USD

The Australian Dollar (AUD) traded within a narrow range against the US Dollar (USD) on Thursday, hovering just above a two-year low of 0.6200 and near the 0.6230 level. This subdued trading activity coincided with a period of heightened market focus on the upcoming release of the US Personal Consumption Expenditures (PCE) price index data for November. The US Dollar Index (DXY), a measure of the greenback's strength against a basket of major currencies, experienced a slight pullback after reaching a two-year high of 108.50. This followed expectations that the core annual PCE inflation rate, the Federal Reserve's preferred inflation gauge, would accelerate to 2.9% in November from 2.8% in October. While core inflation was anticipated to rise by 0.2%, down from the previously reported 0.3%, this data will play a crucial role in influencing market expectations regarding the Federal Reserve's potential interest rate decisions at its upcoming January meeting. The CME FedWatch tool currently indicates a high level of confidence among traders that the central bank will maintain the current interest rate range of 4.25%-4.50%. Meanwhile, the Australian Dollar (AUD) is poised to be significantly influenced by the release of the minutes from the Reserve Bank of Australia (RBA)'s December 10th monetary policy meeting, scheduled for Tuesday. While the RBA maintained the official cash rate (OCR) at 4.35%, a level it has held since November 2023, concerns are mounting regarding a potential slowdown in wage growth and overall economic demand.

The AUD/USD pair has been locked in a sustained downtrend, experiencing a significant decline on Wednesday that breached a crucial long-term support trend line dating back to October 2022. This breach pushed the pair to a 14-month low of 0.6308. A key question for traders is whether these recent dips will be met with buying interest as the price approaches the 2023 low of 0.6269-0.6300. While technical indicators such as the RSI and Stochastics suggest that the selling pressure may be overdone, they have not yet reached levels that definitively signal a reversal of the bearish trend. This suggests that bearish momentum may still hold sway in the near term. If the 0.6200 support level is breached, it could open the door for a further decline towards the 0.6100 circular barrier, followed by a potential move towards the 0.5980 area last seen in April 2020.