As seen on the AUD/USD chart, yesterday the exchange rate fell below the level of 0.618 Australian dollars per 1 US dollar. The last time the Australian dollar was this weak was in April 2020, during the global spread of the coronavirus.
The decline followed the release of inflation data from Australia earlier this week. According to Bloomberg:
→ Overall annual inflation accelerated to 2.3%, up from 2.1% previously.
→ The trimmed mean core inflation (which smooths volatile items and is closely monitored by the Reserve Bank) slowed to 3.2%, down from 3.5%.
→ Traders are pricing in a 70% chance of a 25 basis point rate cut in February from the current 4.35% (a 13-year high).
Technical analysis of the AUD/USD chart shows that, despite the exchange rate being within the current downtrend (shown in red on the chart), there are grounds for bulls to remain hopeful, as:
→ The RSI indicator points to a divergence, which can be interpreted as weakening selling pressure.
→ Although the median line of the channel has acted as resistance (marked by a red arrow), the sharp rise in the first days of 2025 suggests that demand forces are gaining momentum.
Thus, it’s possible that if the AUD/USD exchange rate falls back to the lower boundary of the red channel, this could attract buyers of the weakened Australian dollar.
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