The AUD/USD currency pair continues to face intense pressure, marking its lowest weekly close in 13 months at 0.6389—a 1.92% drop. This recent decline follows a string of disappointing data from both Australia and the global economy, leaving traders to speculate on further downside momentum for the Aussie dollar.
Disappointing Australian GDP Figures Weigh on the Aussie
Australia’s third-quarter GDP data, released last Wednesday, came in well below expectations, with the economy growing by just 0.2% instead of the anticipated 0.4%. This miss has prompted analysts to revise their outlook for the Reserve Bank of Australia (RBA), with market participants now betting on a rate cut in early 2025. While Australia added 50,500 jobs in the third quarter, this growth was overshadowed by the uptick in unemployment, which climbed to 6.8% from the previous 6.5%.
The slower-than-expected GDP growth combined with rising unemployment is driving a shift in expectations for Australian monetary policy. The RBA is now under increased pressure to lower rates sooner than expected. In fact, market forecasts suggest a 50-basis point rate cut could come as early as April 2025.
US Data Strengthens Dollar Amid Global Concerns
On the other side of the Pacific, US non-farm payrolls for November showed a solid rebound, with the US economy adding 227,000 jobs, well above the 195,000 forecast. This stronger-than-expected data bolstered the US dollar, as markets recalibrated their expectations for future Federal Reserve rate hikes.
However, the US labor market did show some signs of weakness, as the unemployment rate ticked up to 4.2%, up from 4.1% in October. Initially, this increase triggered speculation about potential Fed rate cuts, but the US dollar managed to recover as attention shifted back to the overall strength of the US economy.
China’s Economic Troubles: A Drag on AUD
Adding further pressure to the AUD/USD pair is the continued weakness in China’s economy, Australia’s largest trading partner. China’s consumer price index (CPI) for November dropped by 0.6% month-on-month, below expectations. The country’s producer price index (PPI) also remained in negative territory, down 2.5%, signaling ongoing deflationary pressures.
The challenges facing China have been compounded by the possibility of new trade tariffs under a potential second Trump administration. This adds another layer of uncertainty, with markets bracing for a potential slowdown in China’s growth. As a key exporter to China, Australia stands to feel the impact of this sluggishness, which in turn weighs on the Australian dollar.
RBA Faces Inflation Challenges and Rate Cut Pressure
The RBA’s focus on inflation remains a critical issue, as core inflation is still too high, with the trimmed mean inflation rate holding steady at 3.5%, far above the 2-3% target. Despite this, the RBA has maintained a cautious stance, holding the official cash rate steady at 4.35% for the eighth consecutive meeting in November.
While the RBA is expected to leave rates unchanged at the upcoming December meeting, market expectations for a rate cut have already started to rise. The probability of a 25-basis point rate cut in February is now estimated at 46%, with a 100% likelihood of a rate cut in April.
The RBA’s inflation strategy will remain under scrutiny, and there is growing speculation that Governor Bullock could soften his previous stance on rate cuts, depending on upcoming inflation and GDP data. Analysts are keenly watching these developments, as any dovish shift from the RBA could further pressure the AUD/USD pair.
Technical Outlook for AUD/USD: Key Support Levels in Focus
From a technical perspective, AUD/USD has entered a critical phase. After hitting a high of 0.6942 in late September, the pair has steadily declined by 8.25%, reaching as low as 0.6372 last week. This represents a breakdown below several key support levels, with 0.6370-0.6350 emerging as an important support zone.
Should AUD/USD fail to hold above this support range, the pair could face a deeper decline toward 0.6270 and possibly even test the psychologically significant 0.6000 level.
What’s Next for AUD/USD?
As the RBA prepares for its December meeting, AUD/USD traders will be watching for clues on future monetary policy moves. This week’s Labour Force report and any statements from RBA Governor Bullock regarding inflation and rate cuts could provide further direction for the pair.
Meanwhile, the outlook for the US dollar remains closely tied to the ongoing US inflation data and broader global economic conditions. With the US Fed facing its own set of challenges, including potential rate hikes or cuts, the next few weeks could bring further volatility to the AUD/USD pair.
In conclusion, AUD/USD remains under pressure from weak Australian economic data, a stronger US dollar, and ongoing global uncertainties. The pair’s technical outlook remains bearish, but key support levels in the 0.6350-0.6370 region will be crucial in determining the next move for the Aussie dollar.
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