AUD/USD Eyes January High Ahead of RBA Rate Decision

Australia Dollar Outlook: AUD/USD

AUD/USD may stage further attempts to test the January high (0.6331) as it bounces back from the weekly low (0.6235), and the exchange rate may no longer track the negative slope in the 50-Day SMA (0.6274) after closing above the moving average for the first time since October.

AUD/USD Eyes January High Ahead of RBA Rate Decision

AUD/USD seems to be unfazed by the unexpected rise in the US Consumer Price Index (CPI) as it retraces the decline following the release, and it remains to be seen if the update will sway the Federal Reserve as the headline reading climbs to 3.0% in January from 2.8% per annum the month prior, while the core rate widens to 3.3% from 3.2% during the same period.

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Nevertheless, the semi-annual testimony from Fed Chairman Jerome Powell suggests the central bank will gradually move towards a neutral policy as he tells US lawmakers that ‘we do not need to be in a hurry to adjust our policy stance,’ but the Reserve Bank of Australia (RBA) may continue to move to the beat of its own drum should the central bank stick to the sidelines at its first meeting for 2025.

Australia Economic Calendar

Keep in mind, the RBA kept the cash rate at 4.35% throughout 2024, and the central bank may retain a wait-and-see approach in managing monetary policy as Governor Michele Bullock and Co. warn that ‘underlying inflation is still high.’

In turn, more of the same from the RBA may keep AUD/USD afloat as the central bank remains reluctant to shift gears, but a change in the forward guidance for monetary policy may drag on the Australian Dollar should the board prepare households and businesses for lower interest rates.

With that said, AUD/USD may struggle to retain the rebound from the monthly low (0.6088) if the RBA adopts a dovish forward guidance, but the exchange rate may stage a larger recover should it no longer respond to the negative slope in the 50-Day SMA (0.6274).

AUD/USD Price Chart – Daily

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

AUD/USD may stage further attempts to test the January high (0.6331) as it appears to be defending the 0.6240 (61.8% Fibonacci extension) to 0.6270 (2023 low) zone, with a close above 0.6318 (November 2023 low) bringing 0.6410 (50% Fibonacci extension) on the radar.
Next area of interest comes in around the December high (0.6515), but a break/close below the 0.6240 (61.8% Fibonacci extension) to 0.6270 (2023 low) zone may push AUD/USD back towards the 0.6130 (23.6% Fibonacci retracement) to 0.6170 (2022 low) region.
Next area of interest comes in around the monthly low (0.6088), with a break/close below the 0.5980 (April 2020 low) to 0.6020 (38.2% Fibonacci extension) zone opening up the 0.5930 (50% Fibonacci extension).

Additional Market Outlooks

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USD/JPY Rebound Keeps RSI Above Oversold Zone Ahead of Fed Testimony

--- Written by David Song, Senior Strategist

Follow on X at @DavidJSong

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