The Australian dollar (AUD) has seen an uptick as the US dollar corrects downward, following the release of softer US Personal Consumption Expenditures (PCE) data. Friday’s figures have reignited hopes of further Federal Reserve (Fed) policy easing in 2025. However, the market, as per the CME FedWatch tool, is highly confident – with over 90% probability – that the Fed will keep rates unchanged in January, staying within the 4.25%–4.50% range.
While the softer US inflation data bodes well for the AUD, there are domestic headwinds. The Reserve Bank of Australia (RBA) is tipped to start slashing its cash rate as early as February, due to growing signs of economic slowdown. Traders are now gearing up for the release of the RBA’s Meeting Minutes on Tuesday, after the bank held rates steady at 4.35% for the ninth consecutive meeting.
Year-on-year, US core PCE inflation, the Fed’s preferred gauge, rose 2.8%, slower than the expected 2.9%. Monthly core inflation grew at 0.1%, below estimates of 0.2% and the previous 0.3% reading. In Australia, November’s Private Sector Credit expanded by 0.5% month-on-month, meeting expectations, after a 0.6% October increase. Annual growth reached 6.2% in November, the highest since May 2023.
The People’s Bank of China (PBoC) held its one- and five-year Loan Prime Rates (LPRs) unchanged last Friday. In the US, the third-quarter GDP grew at an annualized 3.1%, outpacing forecasts, and Initial Jobless Claims dropped to 220,000. National Australia Bank (NAB) still forecasts the first RBA rate cut for May 2025, but acknowledges February as a possibility, citing expected inflation and unemployment trends.
Technically, the AUD/USD pair hovers near 0.6250. Despite a persistent bearish channel on the daily chart, the 14-day Relative Strength Index (RSI) above 30 signals a possible near-term bounce. Support could be tested near 0.6120 at the lower end of the descending channel. Resistance lies first at the nine-day Exponential Moving Average (EMA) at 0.6303, then at the 14-day EMA at 0.6337, and finally at the upper boundary of the descending channel around 0.6380. A breakout above this could drive the pair towards the nine-week high of 0.6687.
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