AUD/USD Faces Downward Pressure Amid US Fed Rate Cut Expectations and Chinese Economic Concerns

Summary:

AUD/USD declines as US rate cut expectations ease and concerns about China weigh on the Australian Dollar. The pair trades near 0.6220, with a bearish outlook targeting 0.6100, while staying below 0.6270.

SELL AUDUSD

Close Time

CLOSED

0.62000

Entry Price

0.61000

0.62500

0.70968 +0.00231 +0.33%

50.0

Pips

Loss

0.61000

0.62500

Exit Price

0.62000

Entry Price

0.62500

The Australian Dollar (AUD) remains under pressure, continuing its decline against the US Dollar (USD) for the fifth consecutive day. As of Friday’s Asian session, AUD/USD is trading near 0.6220, reflecting growing market sentiment that supports the Greenback. The primary catalyst for this weakness is the rising probability of fewer rate cuts by the US Federal Reserve (Fed) next year, following the central bank's December meeting.

In the Fed’s latest policy decision, it trimmed rates by a quarter-point but simultaneously adjusted its 2025 outlook, now projecting only two rate cuts instead of the previously anticipated four. This shift has added support to the USD, which remains elevated, with the US Dollar Index (DXY) holding above 108.00, just shy of its highest level since November 2022. However, the USD's upside may face some resistance as 2-year and 10-year US Treasury yields remain subdued at 4.32% and 4.57%, respectively, signaling a more cautious outlook for future rate hikes.

On the other side, the Australian Dollar is facing multiple headwinds. The Reserve Bank of Australia (RBA) has hinted at potential rate cuts in 2025, with market expectations centered on a reduction to 3.6% by the year’s end. According to the latest RBA minutes, there is growing confidence that inflation is heading back toward its target, which, while positive, signals that the central bank may ease policy to support economic growth in the future.

Beyond domestic factors, the AUD is struggling due to broader global concerns, particularly regarding the health of China's economy. As Australia's largest trading partner, any signs of weakness in China significantly impact the Australian economy. Although the World Bank recently raised its growth forecast for China for 2024 and 2025, it also warned of persistent risks, including weak confidence and challenges in the property sector, which could continue to weigh on economic growth.

Moreover, market sentiment has been influenced by recent Chinese economic measures. Reports indicate that Chinese officials have more flexibility in using government bond proceeds to stimulate growth. These efforts could spur demand for commodities, including oil, from the world’s largest consumer. However, the overall risks surrounding China’s economic trajectory remain a concern for AUD traders.

Technical Analysis

From a technical standpoint, AUD/USD is currently showing a calm bearish bias as it nears the 0.6200 support level. The bearish trend remains intact, with the pair remaining within a well-defined downward channel. As long as AUD/USD stays below 0.6270, the outlook remains negative, with the next target seen at 0.6100.

The expected trading range for the pair is between 0.6160 (support) and 0.6250 (resistance). If the price breaks below 0.6160, the bearish momentum could intensify, confirming the next leg lower.

TRADE RECOMMENDATION

SELL AUDUSD

ENTRY PRICE: 0.6200

STOP LOSS: 0.6250

TAKE PROFIT: 0.6100

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AUD/USD Faces Downward Pressure Amid US Fed Rate Cut Expectations and Chinese Economic Concerns

Risk Disclosure