AUD/USD. Analysis and Forecast

[Ben Graham]

Today, the AUD/USD pair continues its consolidation near December highs as markets await the Federal Reserve's interest rate decision. The Fed is expected to announce its decision during the North American session today, and most analysts anticipate a 25-basis-point rate cut. This expectation has been one of the key factors behind the recent weakening of the U.S. dollar to its lowest levels since late October and the notable rise in AUD/USD observed over the past two weeks.

However, market participants prefer to refrain from aggressive buying and are waiting for additional signals regarding the Fed's future policy path. Key attention will be focused on updated economic projections and Fed Chair Jerome Powell's press conference after the meeting. These data points will be crucial in shaping the short-term trend of the U.S. dollar and the direction of the AUD/USD pair. At the same time, the Reserve Bank of Australia's (RBA) hawkish stance continues to support the Australian dollar, positively influencing the currency pair.

As expected, on Tuesday the RBA left its Official Cash Rate (OCR) unchanged at 3.6%. RBA Governor Michele Bullock noted that the board discussed the possibility of raising rates and concluded that further cuts are not necessary at this time. This suggests continued strengthening of the Australian dollar, which held steady despite mixed inflation data from China: while consumer prices rose in November, producer prices declined.

According to China's National Bureau of Statistics, the Consumer Price Index (CPI) rose 0.7% year-on-year last month, compared to 0.2% in October. Meanwhile, the Producer Price Index (PPI) fell 2.2% year-on-year versus a 2.1% decline the previous month. Despite these figures, the fundamental backdrop favors a stronger Australian dollar, suggesting that the short-term trend in AUD/USD remains upward.

From a technical standpoint, the pair is consolidating near December highs as it attempts to break above 0.6650. Above this level, the next resistance is at 0.6660, on the way toward the psychological 0.6700 level. Oscillators on the daily chart are positive, but it is worth noting that the Relative Strength Index is nearing overbought territory.

Nevertheless, a breakout above 0.6650, or the multi-month high, would create conditions for further upside and potentially push the pair toward the yearly high. On the other hand, immediate support lies at 0.6620, followed by 0.6610, ahead of the key 0.6600 level.

The table below shows the percentage changes of the Australian dollar against major currencies for the current month. The most notable rise was registered against the Swiss franc.

The material has been provided by InstaForex Company - www.instaforex.com