- AUD/USD hits a fresh year-to-date low, pressured by a mix of factors.
- The Reserve Bank of Australia’s dovish stance and China’s ongoing economic troubles continue to weigh on the Australian Dollar.
- Expectations of a slower pace of Fed rate cuts support the US Dollar ahead of the upcoming US CPI report.
The AUD/USD pair remains under selling pressure for the second consecutive day on Wednesday, dropping to the 0.6340 region, marking its lowest level since November 2023 during the European session. The bearish outlook persists as fundamental factors continue to favor downward movement, although traders may hold off on fresh positions until the US Consumer Price Index (CPI) report is released.
The US CPI data is crucial for shaping expectations regarding the Federal Reserve's interest rate decisions, which will directly impact the US Dollar's (USD) trajectory and provide new direction for AUD/USD. Additionally, the prevailing belief that the Fed will take a cautious approach to rate cuts supports higher US Treasury bond yields, further strengthening the USD. Geopolitical risks also contribute to a rise in the safe-haven USD, exacerbating downward pressure on the AUD/USD pair.
Meanwhile, the Australian Dollar (AUD) is weighed down by the Reserve Bank of Australia's (RBA) dovish stance. The RBA's recent monetary policy statement indicated confidence that inflation is heading towards the 2%-3% target but removed the previous cautionary note about restrictive policy, reinforcing expectations of an early rate cut. Concerns over China's economic recovery and US-China trade tensions further contribute to a negative outlook for the AUD.
Given this backdrop, any reaction to a softer US CPI print is likely to be muted. Oscillators on the daily chart remain deeply negative, suggesting that any potential recovery in AUD/USD could be short-lived and viewed as a selling opportunity.
