Australian Dollar Forecast: AUD/USD Falls from Channel Resistance

Australia Dollar Outlook: AUD/USD

AUD/USD appears to be falling from channel resistance as it continues to pull back from the monthly high (0.6409), with the recent weakness in the exchange rate keeping the Relative Strength Index (RSI) below overbought territory.

Australian Dollar Forecast: AUD/USD Falls from Channel Resistance

AUD/USD seems to be trading within an ascending channel as it no longer responds to the negative slope in the 50-Day SMA (0.6264), and the exchange rate may further retrace the decline form the December high (0.6515) as the Reserve Bank of Australia (RBA) reiterates that ‘sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority.’

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As a result, the RBA may move to the sidelines after delivering a rate-cut for the first time since 2020, and data prints coming out of Australia may push the central bank to gradually unwind its restrictive policy as the monthly update to the Consumer Price Index (CPI) is anticipated to show sticky inflation.

Australia Economic Calendar

Australia’s CPI is expected to increase to 2.6% in January from 2.5% per annum the month prior, and a signs of persistent price growth may generate a bullish reaction in the Australian Dollar as it curbs speculation for another RBA rate-cut.

At the same time, a lower-than-expected CPI print may drag on the Australian Dollar as it raises the RBA’s scope to implement lower interest rates, and Governor Michele Bullock and Co. may continue to switch gears in 2025 as ‘there are signs that disinflation might be occurring a little more quickly than earlier expected.’

With that said, AUD/USD may consolidate over the remainder of the month as it pulls back from channel resistance, but the exchange rate may continue to trade within an ascending channel as it holds above the 50-Day SMA (0.6264).

AUD/USD Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; AUD/USD on TradingView

AUD/USD appears to be pulling back from channel resistance amid the failed attempt to break/close above 0.6410 (50% Fibonacci extension), and lack of momentum to hold above 0.6318 (November 2023 low) may push the exchange rate back towards channel support.
Nevertheless, AUD/USD may threaten the ascending channel on a break/close below the 0.6240 (61.8% Fibonacci extension) to 0.6270 (2023 low) zone, with the next area of interest coming in around 0.6130 (23.6% Fibonacci retracement) to 0.6170 (2022 low).
At the same time, a break/close above 0.6410 (50% Fibonacci extension) may push AUD/USD towards the December high (0.6515), with a breach above the 0.6510 (38.2% Fibonacci retracement) to 0.6520 (38.2% Fibonacci extension) area opening up 0.6590 (38.2% Fibonacci extension).

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--- Written by David Song, Senior Strategist

Follow on X at @DavidJSong

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