Extending Bearish Pressure on AUD/USD with a Key Support Break
Market Overview
The Australian Dollar (AUD) continues to face headwinds against the US Dollar (USD), as the latter maintains robust demand ahead of the highly anticipated US inflation report. Scheduled for release later today, this report is expected to provide crucial insights into the Federal Reserve’s potential pace of interest rate cuts and its decision-making at next week’s policy meeting. The USD’s strength has amplified selling pressure on the AUD/USD pair, accelerating a downtrend that began in early December.
Additionally, market participants are closely monitoring developments in China, where the Central Economic Work Conference is underway. Expectations of accommodative policies to support growth may weigh on the yuan, indirectly influencing sentiment surrounding the Australian Dollar due to Australia’s trade ties with China.
Technical Analysis
On the four-hour chart, the AUD/USD pair has decisively breached its prior support level at 0.63724, extending its bearish trajectory. The break below this key level has positioned the pair near immediate support at 0.63456, reflecting the continued dominance of sellers.
Momentum indicators confirm the bearish outlook. The Relative Strength Index (RSI) is firmly in negative territory, suggesting sustained selling pressure. Meanwhile, the Moving Average Convergence Divergence (MACD) indicator shows widening negative lines, underlining the growing strength of the bearish momentum.
The next key downside targets lie at 0.63114 and 0.62737, levels that align with Fibonacci retracements and prior price reactions. A sustained move below these thresholds could open the door to further declines, particularly if macroeconomic conditions continue to favor USD strength.
However, a reversal scenario cannot be ruled out. Should buyers regain control and push the pair above the resistance at 0.64101, a test of the recent high at 0.64711 would become plausible. A clear break above this level would invalidate the current downtrend and signal a potential shift toward bullish sentiment.
Key Levels
- Resistance Levels: 0.63724, 0.64101, 0.64711
- Support Levels: 0.63456, 0.63114, 0.62737
Key Events to Watch
The release of the US inflation data is the focal point for the markets. Headline inflation for November is projected to rise to 2.7% year-on-year, up from 2.6% previously, with a monthly increase of 0.3%. Core inflation, which excludes volatile food and energy prices, is expected to remain steady at 3.3% year-on-year, also reflecting a 0.3% monthly uptick. Stronger-than-expected inflation figures could bolster expectations of a prolonged hawkish stance by the Federal Reserve, further supporting the USD.
In parallel, developments from China’s economic conference could influence global risk sentiment. If the government announces further stimulus measures, it could weigh on the yuan and potentially dampen AUD sentiment due to their economic linkages.
Conclusion
The AUD/USD pair remains in a pronounced bearish trend, with further downside likely as long as sellers maintain momentum. Key support levels at 0.63114 and 0.62737 are in focus, while a reversal above 0.64101 could challenge the downtrend. Upcoming US inflation data and developments in China will be pivotal in shaping the pair’s trajectory.
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