Key Points:
- AUD/USD trades near $0.635, with resistance at $0.637 and support at $0.6327.
- The RBA signals cautious rate cuts, while labour data suggests resilience in employment.
The Australian dollar is trading around $0.6348, fluctuating within a narrow range after touching a high of $0.637. This movement follows the latest labour market data, which showed Australia’s unemployment rate ticked up to 4.1% in January, with employment rising by 44,000, surpassing expectations.
Earlier this week, the Reserve Bank of Australia (RBA) reduced its cash rate by 25 basis points to 4.1%, as anticipated. However, the central bank signalled caution regarding further cuts, warning that inflation risks persist.
Governor Michele Bullock stated that the RBA cannot declare victory over inflation and highlighted the limited room for additional rate reductions.
Market sentiment currently prices in two more 25 basis point rate cuts, forecasting a cash rate of 3.6% by September. Despite this, traders are hesitant to push AUD/USD higher, as resistance at $0.637 remains intact.
Technical Analysis
The Aussie has been fluctuating, trading within a tight range between approximately 0.63400 and 0.63700. The MACD indicator shows a mixed sentiment with momentum swinging slightly above and below the zero line, suggesting a lack of strong directional momentum.
Picture: AUD/USD consolidating near 0.6348 with choppy price action and no clear breakout direction, as seen on the VT Markets app.
Traders should watch for a break out of the current trading range for a clearer direction, while also paying attention to key support and resistance levels marked around 0.63400 and 0.63700 respectively. This could provide potential trade setups if the currency either breaks these levels with strong volume or bounces off them with clear rejection signals.
The Australian dollar remains sensitive to global risk sentiment, particularly developments in the US economy and Federal Reserve policy. Recent comments from Fed officials suggest that US rate cuts may be slower than expected, supporting the US dollar and limiting AUD upside. Market participants await the latest FOMC meeting minutes, due this week, for insights into the Fed’s outlook.
Meanwhile, China’s economic trajectory remains a crucial factor for the Australian dollar, given Australia’s heavy trade reliance on China. Beijing has been rolling out measured stimulus efforts, though markets remain uncertain about the effectiveness of these measures in boosting economic growth. If China’s economy shows signs of slowing, demand for Australian exports such as iron ore could weaken, pressuring the AUD.
