11 Dec 2024

AUD/USD has reached a new year-to-date low, influenced by a variety of factors. The Reserve Bank of Australia's dovish stance, along with economic challenges in China, continues to exert pressure on the Australian dollar. Additionally, expectations for a more gradual reduction in Federal Reserve interest rates support the strength of the US dollar in anticipation of the upcoming US Consumer Price Index report.

The AUD/USD pair is experiencing continued selling pressure for the second consecutive day on Wednesday, declining to the 0.6340 region, marking its lowest point since November 2023 during the early part of the European session. Additionally, the prevailing fundamental conditions indicate that the most likely trajectory for spot prices is downward; however, bearish traders may choose to wait for the release of US consumer inflation data before making new investments.

The upcoming US Consumer Price Index (CPI) report is anticipated to provide insights into the interest rate outlook in the United States and will inform Federal Reserve (Fed) policymakers in their decisions next week. This report is expected to significantly impact the near-term dynamics of the US Dollar (USD) and offer new directional momentum for the AUD/USD pair. Meanwhile, the increasing belief that the US central bank will maintain a cautious approach regarding interest rate cuts supports a potential rise in US Treasury bond yields. Furthermore, ongoing geopolitical uncertainties are elevating the safe-haven US dollar to a one-week high, which continues to exert pressure on the currency pair.

The Australian Dollar (AUD) is currently facing pressure due to the dovish stance of the Reserve Bank of Australia (RBA), which is perceived as a contributing factor to the bearish sentiment surrounding the AUD/USD pair. In its monetary policy statement issued on Tuesday, the RBA expressed increased confidence that inflation is moving towards the annual target range of 2%-3%. Additionally, the central bank removed the previous assertion that policy must remain restrictive, thereby reinforcing expectations for a potential early interest rate cut. Furthermore, concerns regarding China's fragile economic recovery and the ongoing US-China trade tensions further support the negative outlook for this currency pair.

This fundamental context indicates that any immediate market response to a softer US Consumer Price Index (CPI) reading is likely to be muted. Additionally, the oscillators on the daily chart remain significantly in negative territory and are not yet approaching the oversold zone. Consequently, any attempts at recovery in the AUD/USD pair may be viewed as an opportunity for selling, with the potential to dissipate rapidly.