The Australian dollar continues its downward spiral, reaching its lowest point in eight months as concerns about inflation continue to weigh on the currency. The AUD/USD exchange rate plummeted to 0.6539 mid-week, marking its lowest level since August. This decline began on October 1st, with the pair experiencing little respite from its downward trajectory.
Recent economic data revealed that Australia’s annual inflation cooled to 2.8% in Q3 from 3.8% in Q2, falling just below the expected 2.9%. While this brings inflation within the Reserve Bank of Australia’s (RBA) target range of 2-3%, the core inflation gauge closely monitored by the RBA remains elevated at 3.5% year-on-year in Q3. This persistent core inflation has kept the RBA from considering any immediate interest rate cuts. The central bank maintains that inflation needs to stabilize before they will consider easing monetary policy.
With the RBA’s next meeting scheduled for next week, market consensus does not anticipate a change in the current interest rate of 4.35% per annum. Rate cuts are not expected until at least May 2025.
Technical Analysis of AUD/USD
The AUD/USD is firmly entrenched in its downward trend, targeting 0.6533. If this level is reached, a brief corrective phase toward 0.6613 may follow, but the downward trend is expected to resume towards 0.6491. The MACD indicator supports this bearish outlook, as its signal line remains well below zero, indicating a continuation of the downward momentum.
On the hourly chart, AUD/USD has established a consolidation range around 0.6570. A break below this range will likely drive the pair further towards 0.6533. Once this level is achieved, a corrective move to 0.6613 may begin, with an intermediate target at 0.6570. This potential upward correction is supported by the Stochastic oscillator, whose signal line is currently below 20 but poised to rise towards 80, suggesting a brief respite from the selling pressure.
This analysis offers a technical perspective on the AUD/USD and its potential trajectory based on current market conditions. It is crucial to remember that this analysis should not be considered investment advice. Market dynamics can change rapidly, and careful consideration of various factors is essential before making any trading decisions.
