- Australia's inflation falls short of expectations, fueling RBA rate cut speculation.
- Ongoing US-China trade tensions weigh on the Australian dollar.
- Traders look to the Federal Reserve's decision for further market direction.
The AUD/USD fell 0.57% to 0.6225 on Wednesday, hovering near weekly lows below 0.6250. Softer-than-expected Australian inflation data reinforced expectations of a February rate cut by the Reserve Bank of Australia (RBA), weighing on the Aussie. Meanwhile, weak economic signals from China and escalating U.S.-China trade tensions added further downside pressure, while investors awaited the Federal Reserve's monetary policy decision later in the day.
Market Sentiment: Focus on the Fed and RBA
Investor sentiment remains cautious ahead of the Federal Reserve's policy announcement. While the Fed is expected to keep rates unchanged, traders are looking for clues on future policy moves. Any hawkish signals - such as concerns over persistent inflation or a delay in rate cuts - could strengthen the U.S. dollar, pushing AUD/USD lower.
At the same time, Australia's inflation data came in below expectations, increasing speculation that the RBA may ease monetary policy at its upcoming meeting. The latest data showed:
- Quarterly inflation rose 0.2%, missing the 0.3% forecast.
- Annual inflation slowed to 2.4%, down from 2.8% in the previous quarter and below the expected 2.5%.
- December's Monthly CPI rose 2.5%, in line with forecasts and within the RBA's 2%-3% target range.
Adding to the Australian dollar's struggles, concerns over potential U.S. tariffs on Chinese goods continue to mount. White House Press Secretary Karoline Leavitt reiterated that President Donald Trump is still considering a 10% tariff on Chinese imports, with a decision expected in February.
Technical Outlook: Bearish Momentum Persists
AUD/USD remains under pressure, trading within a tight range and struggling to recover.
- The Relative Strength Index (RSI) is at 43, signaling continued bearish momentum.
- The MACD histogram prints green bars but is declining, indicating weakening bullish signals.
- The pair is below the 20-day Simple Moving Average (SMA) at 0.6230, suggesting further downside risks.
Key Levels to Watch:
- Support: 0.6200, with a break lower exposing 0.6170.
- Resistance: 0.6250, followed by 0.6300.
While the MACD suggests some upside potential, the RSI indicates ongoing bearish pressure. A failure to reclaim 0.6230 could trigger further selling, pushing AUD/USD toward new lows.
