The Australian dollar continues to struggle against the US dollar, with the AUD/USD pair trading near its monthly lows as investors brace for the release of the Federal Reserve’s FOMC meeting minutes on Wednesday. Despite a modest uptick on Tuesday, the recovery appears fragile, capped by a broadly stronger greenback and ongoing caution around global economic growth.
Technical outlook
From a technical perspective, the pair is consolidating near the 0.6550–0.6570 zone after failing to hold above the 0.6600 handle. The immediate support sits at the 0.6550 level, which aligns with the 61.8% Fibonacci retracement of the October-to-December rally. A break below this could expose the psychologically important 0.6500 level, with further downside potentially targeting the 2023 lows around 0.6450. On the upside, resistance is seen at 0.6600, followed by the 50-day moving average near 0.6650. Momentum indicators like the Relative Strength Index (RSI) remain below the 50 midline, signaling continued downside risk.
Fundamental drivers: USD strength and risk aversion
The Australian dollar’s weakness is largely a reflection of persistent US dollar strength, fueled by expectations that the Federal Reserve will keep interest rates higher for longer. Recent strong US economic data, including retail sales and manufacturing figures, have pared back hopes for near-term rate cuts, elevating Treasury yields and boosting the dollar’s appeal. Additionally, risk-sensitive currencies like the Australian dollar are under pressure from geopolitical tensions and concerns over China’s uneven recovery, which dampens demand for Australia’s key commodity exports.
FOMC minutes as the next catalyst
All eyes are now on the minutes from the Fed’s January policy meeting, due on Wednesday. Traders will scrutinize the document for any shifts in the central bank’s inflation outlook or labor market assessment. A hawkish tone—indicating policymakers are in no rush to ease—could push the US dollar higher and extend the AUD/USD’s losses. Conversely, any dovish hints about economic slowdown might offer the Aussie a temporary reprieve. Until then, the path of least resistance remains to the downside, and a clear break below key support could accelerate selling pressure.
