The AUD/USD rate remained mostly unchanged after a spike following the release of Australian inflation data. The Consumer Price Index (CPI) for November showed inflation slowing, but it still exceeded the Reserve Bank of Australia’s target range of 2-3%. Despite some indicators suggesting overbuying, the overall outlook is positive, with prices close to 15-month highs. In November, the general CPI did not change from the previous month, while the annual rate fell from 3.8% to 3.4%. The trimmed mean CPI rose 0.3% month-on-month and decreased to 3.2% year-on-year. In contrast, US economic data was mixed: private payrolls added 41,000 jobs, but job openings dropped to 7.146 million, according to JOLTS data.

Technical Analysis Overview

On the technical side, the Relative Strength Index (RSI) is nearing overbought territory, hinting at a possible pullback. Still, the overall trend remains positive, with the AUD/USD trading above key Simple Moving Averages. Support is expected around 0.6660, while resistance may be found near 0.6800. The US Dollar showed mixed results against major currencies, strengthening most notably against the British Pound. The heat map below displays percentage changes in major currency pairs, with the base currency on the left and the quote currency at the top. The AUD/USD remains close to its highest levels in over a year, yet the upward trend appears to be losing momentum. The RSI is near 70, indicating that the pair may be overbought and a pullback could be imminent. While the overall trend is still positive, caution is advisable in the short term.

Economic Factors and Predictions

We see the Australian dollar being supported by domestic factors, as November’s inflation data shows price pressures still above the RBA’s target. The unemployment rate is steady below 4%, and iron ore prices, a key export, have stabilized above $130 per tonne. Looking ahead to 2025, the RBA’s ongoing battle with persistent inflation has prevented any rate cuts, continuing to support the Aussie dollar. On the US side, the economic landscape is less clear, resulting in uncertainty for the dollar. While last month’s ISM Services data was strong, declining job openings indicate a cooling labor market. The market is now looking forward to this Friday’s Non-Farm Payrolls report for clearer guidance, with futures markets pricing in a 65% chance of a Federal Reserve rate cut by June. For derivative traders, this environment suggests strategies that guard against a short-term decline while maintaining exposure to the longer-term uptrend. Buying put options with a strike around 0.6700 could be a cost-effective way to hedge against a drop to the 0.6660 support level. For those holding long positions, selling covered calls with a strike above 0.6800 could provide income while the pair stabilizes. Key technical levels to monitor include initial support around 0.6660, followed by a stronger zone near 0.6570 where major moving averages meet. Successfully holding these levels could present an opportunity to buy call options, aiming for a potential rise toward the psychological barrier of 0.6800. The trend’s strength, indicated by a high ADX reading, suggests that any dips are likely to be seen as buying opportunities. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now