The Australian Dollar (AUD) is facing headwinds as market sentiment favors safe haven assets, leaving AUD/USD trading near 2-year lows. Traders await RBA guidance on policy direction.
AUD/USD continues to trade tightly around the 0.6200 level. Market sentiment began 2025 favoring safe haven assets, leading to a decline in the AUD. Australian traders are waiting for further guidance from the RBA regarding policy direction before making any significant moves. AUD/USD attempted to rally at the start of 2025 but failed, rising on low volumes before falling back to 0.6200.
The broader market's shift towards the safe-haven US Dollar put pressure on the AUD/USD pair, which remains stuck in a range near two-year lows. The economic calendar is relatively quiet in Australia for the rest of the week, leaving investors to focus on the US Purchasing Managers Index (PMI) figures due on Friday and uncertainty surrounding the Australian interest rate differential. The Federal Reserve (Fed) is anticipated to make fewer interest rate cuts in 2025 than previously predicted, supporting demand for the US Dollar overall. Market liquidity remains constrained due to the New Year's holidays, which closed markets during the midweek session. The cautious approach to trading in the beginning of the new year suggests a challenging outlook for near-term AUD/USD gains. US ISM Manufacturing PMI survey results are expected to remain flat at a contractionary 48.2 on Friday. AUD/USD bulls are searching for a fresh upward breakout in the coming days as buying activity seems to be preventing further declines. However, a new wave of short-selling is still possible, especially if prices fall below the support level established last week near 0.6180
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