AUD/USD Price Analysis – Dec 19, 2024
Daily Price Outlook
Despite the strong US dollar, the AUD/USD pair managed to maintain its bullish momentum, trading confidently around the 2,617 level and briefly reaching a high of 2,626.
This upward trend was largely supported by Australia's positive Consumer Inflation Expectations report released on Thursday.
However, the Australian dollar faced some challenges due to growing expectations that the Reserve Bank of Australia (RBA) might cut interest rates sooner and more aggressively than previously anticipated.
Meanwhile, the US dollar's strength, fueled by the Federal Reserve's hawkish 25 basis-point rate cut during its December meeting, played a significant role in limiting the AUD/USD pair's gains.
Impact of Rising Inflation Expectations and Global Uncertainties on the AUD/USD Pair
Australia's Consumer Inflation Expectations surged to 4.2% in December, up from 3.8% the previous month, marking the highest level since September. This indicates rising price pressures within the economy.
Despite this, the Australian dollar faces significant challenges due to growing expectations that the Reserve Bank of Australia (RBA) may cut interest rates sooner and more aggressively than initially anticipated.
National Australia Bank (NAB) predicts the first rate cut could occur as early as May 2025, with February also being a possibility.
They forecast the unemployment rate to peak at 4.3% before gradually improving to 4.2% by 2026, while inflation is expected to ease slowly to 2.7% by late 2025.
In addition, Australia’s consumer confidence has taken a hit, with Westpac's Consumer Confidence Index falling by 2% to 92.8 points in December, reversing two months of positive momentum.
This signals growing concerns among households about the economic outlook. Globally, external factors are also exerting pressure on the Australian dollar.
China, Australia’s largest trading partner, has set a growth target of around 5% for 2025. However, uncertainties surrounding the US potentially imposing 10% tariffs on Chinese exports and a record $45.7 billion net outflow from China's capital markets in November have raised concerns about economic stability.
Chinese authorities, under President Xi Jinping, are working to boost the economy by increasing the fiscal deficit and focusing on consumption-driven growth. However, the lack of clear details on fiscal support has added to the uncertainty surrounding the Australian dollar.
Given China's importance to Australia’s trade, these economic uncertainties, combined with cautious signals from the RBA, are weighing on the outlook for the Australian dollar, limiting its gains against the US dollar.
Therefore, the rising inflation expectations in Australia and concerns about potential interest rate cuts by the RBA, combined with global uncertainties like China’s economic challenges, are putting downward pressure on the AUD, limiting its gains against the US dollar in the AUD/USD pair.
AUD/USD – Technical Analysis
The AUD/USD pair is trading at $0.62204, marking a modest gain of 0.07% in the current session. Despite the uptick, the pair remains under bearish pressure, trading below its pivot point at $0.62746.
Immediate resistance is seen at $0.63375, with additional hurdles at $0.63899 and $0.64509. On the downside, immediate support lies at $0.61720, followed by $0.61232 and $0.60746.
Technical indicators suggest further downside risks. The RSI at 25 highlights oversold conditions, implying limited room for additional bearish moves in the short term.
However, the 50 EMA at $0.65234 underscores a broader bearish trend, with the AUD/USD pair struggling to sustain any recovery above key levels.
A failure to reclaim the pivot point at $0.62746 could encourage further selling pressure, targeting the immediate support at $0.61720.
A decisive break below this level might expose the pair to deeper losses toward $0.61232 and $0.60746. On the upside, clearing the pivot and sustaining momentum above $0.63375 would be crucial for a bullish reversal.
Traders may consider a sell limit at $0.62763, targeting $0.61845, with a stop-loss placed at $0.63382.
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