The Australian Dollar (AUD) gained for a third consecutive day, surpassing the 0.6200 level against the US Dollar (USD) after the US CPI release failed to surprise markets. The focus now shifts to the upcoming Australian jobs report. Despite facing challenges from a strong US Dollar, slowing domestic fundamentals, and China's economic slowdown, the AUD is showing signs of recovery.
The Australian Dollar (AUD) gained for the third consecutive day, surpassing the 0.6200 level against the US Dollar (USD). This advance comes as the US Dollar experienced weakness following the release of the Consumer Price Index ( CPI ), which failed to deliver any surprises. Market focus is now turning towards the upcoming Australian jobs report.The US Dollar fluctuated between gains and losses on Wednesday, with the US Dollar Index (DXY) dipping below the 109.
00 mark shortly after the CPI announcement. However, it rebounded to the 109.30 region by the end of the trading session. In contrast, the Australian Dollar continued its week-long rally, exceeding 0.6200 and potentially setting the stage for a test of the 0.6300 resistance level in the near future.What is driving the Australian Dollar's recovery? Despite facing pressure from the dominant US Dollar, the Aussie has managed to regain some ground in recent days, fueled by a weakening bias in the Greenback. The surge in the US Dollar around October coincided with the so-called 'Trump trade'. Domestically, the Reserve Bank of Australia (RBA) is considering the possibility of a rate cut in February, citing weak economic momentum and easing inflation concerns. Market expectations for a rate cut currently stand at 62%. Additionally, Australia faces challenges such as lower-than-anticipated Q3 GDP growth (0.3% quarter-on-quarter, 0.8% year-on-year) and declining consumer confidence, which fell to 92.1 in January. Soft commodity prices, coupled with worries about China's economic slowdown – a key driver of Australian exports – have further compounded the pressure. The release of Australia's December labor market report on Thursday could be crucial in determining the RBA's next move in early February.Market signals: RBA keeps everyone guessing At its December meeting, the RBA maintained its interest rates at 4.35% but indicated potential cuts, suggesting that inflation risks are diminishing. RBA Governor Michele Bullock emphasized that future policy decisions will be contingent upon economic data.Challenges and glimmers of hope for AUD/USD The AUD/USD pair faces several obstacles, including persistent US Dollar strength, a slowdown in domestic economic fundamentals, and China's sluggish recovery. However, if the Federal Reserve (Fed) signals a continuation of rate cuts, it could offer some much-needed support to the pair.Technical outlook The AUD/USD remains vulnerable, with critical support at 0.6130. A break below this level could send the pair towards the psychological 0.6000 mark. Resistance lies at 0.6301, with stronger barriers around 0.6401 and 0.6549. Momentum indicators present mixed signals, with the RSI suggesting short-term optimism around 41, but the ADX above 35 confirms a strong bearish trend.AUD/USD daily chart What to watch this week Key Australian data, including labor market figures and inflation expectations, will play a significant role in shaping the outlook. For now, the Australian Dollar remains under considerable pressure despite its three-day rebound. Its recovery is intertwined with both domestic developments and global economic shifts
AUD/USD Australian Dollar US Dollar Forex CPI RBA Interest Rates Australian Jobs Report Economic Outlook
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