Australian Dollar dives to multi-month low against USD amid bets for early RBA rate cut

• The Australian Dollar attracts heavy selling following the release of weaker domestic GDP print.
• China’s economic woes and US-China trade war fears also undermine the China-proxy Aussie.
• The USD bulls seem reluctant ahead of Powell’s speech, though fails to benefit the AUD/USD.

The Australian Dollar (AUD) slumps to the lowest level since August against its American counterpart amid bets that slower domestic growth will put pressure on the Reserve Bank of Australia (RBA) to cut interest rates in early 2025. Adding to this, a private survey showed that China’s services sector grew less than expected in November. This, along with new US export curbs on China, concerns about China’s fragile economic recovery and US President-elect Donald Trump’s impending tariffs, turn out to be key factors weighing heavily on the China-proxy Aussie. 

Furthermore, a modest US Dollar (USD) uptick, bolstered by expectations for a less dovish Federal Reserve (Fed), contributes to the AUD/USD pair’s sharp intraday fall. Meanwhile, the USD bulls seem reluctant to place aggressive bets ahead of Fed Chair Jerome Powell’s speech, which will be looked for more cues about the future rate-cut path. Even a positive tone around the equity markets fails to ease the bearish pressure surrounding the risk-sensitive Aussie. This, in turn, supports prospects for a further near-term depreciating move for the currency pair. 

Australian Dollar adds to weaker domestic GDP-inspired slump amid bets for early RBA rate cut

• The Australian Bureau of Statistics (ABS) reported this Wednesday that the economy expanded by 0.3% in the third quarter and by 0.8% on a yearly basis, missing estimates for a reading of 0.4% and 1.1%, respectively. 
• Commenting on the critical economic report, Australia’s Treasurer Jim Chalmers said that the national accounts show positive but weak GDP growth and that it is encouraging to see growth in real disposable incomes.
• The markets were quick to react and fully priced in a rate cut by the Reserve Bank of Australia (RBA) next April. Moreover, Refinitiv interest rate probabilities indicate a 35 basis point easing for May, up from 28 bps before. 
• The latest data published by Caixin showed that China’s Services Purchasing Managers’ Index (PMI) fell to 51.5  in November from 52.0 in October, fueling worries about a fragile recovery in the world’s second-largest economy.
• The US announced a new set of export controls to curb China’s technological advancements and restricting the sale of crucial semiconductor-manufacturing equipment and high-bandwidth computer memory to the country.
• This comes after US President-elect Donald Trump threatened a 100% tariff on BRICS nations – Brazil, Russia, India, China, and South Africa – if they undermine the US Dollar by creating or backing alternative currencies. 
• The US Job Openings and Labor Turnover Survey (JOLTS) data published on Tuesday showed that the number of job openings on the last business day of October stood at 7.74 million, up from 7.37 million in the prior month.
• The data eases fears of a significant slowdown in the US labor market and might force the Federal Reserve to take a cautious stance on cutting rates amid expectations that Trump’s expansionary policies will boost inflation. 
• The US Treasury bond yields shot up in reaction to the upbeat data, though failed to impress the US Dollar bulls as the markets are still pricing in a greater chance that the Fed will lower borrowing costs again in December. 
• San Francisco Fed President Mary Daly said that the US economy is in a really good place, while the labor market is in balance and is not a source of inflation. Daly added that the December rate cut is not off the table.
• Board of Governors member Adrianna Kugler reiterated that the progress on inflation is still underway, while the policy is not on a preset course and that the central bank will make decisions meeting by meeting.
• Adding to this, Chicago Fed President Austan Goolsbee said that rates remain restrictive and need to come down a fair amount from where they are now over the next year if inflation gets close to the target.
• The market attention now shifts to Fed Chair Jerome Powell’s speech, which, along with the US Nonfarm Payrolls (NFP) report on Friday, should guide policymakers on their next monetary policy decision. 

AUD/USD seems vulnerable to extend the intraday downfall further below the 0.6400 round figure

From a technical perspective, weakness below the 0.6440-0.6435 region marks a breakdown through a short-term trading range held over the past two weeks or so. Moreover, oscillators on the daily chart are holding in negative territory and are still away from being in the oversold zone. This, in turn, suggests that the path of least resistance for the AUD/USD pair is to the downside and supports prospects for a further depreciating move. Spot prices now seem vulnerable to weaken further below the 0.6400 mark and retest the year-to-date low, around the 0.6350-0.6345 region touched in August. 

On the flip side, any meaningful recovery back above the 0.6500 psychological mark is likely to confront stiff resistance and remain capped near the 0.6535-0.6540 supply zone. A sustained strength beyond, however, could trigger a short-covering rally and allow the AUD/USD pair to reclaim the 0.6600 round figure en route to the 0.6625-0.6630 confluence hurdle. The latter comprises the 200- and the 50-day Simple Moving Averages (SMAs), which if cleared decisively might shift the near-term bias in favor of bullish traders and pave the way for additional gains.