Last Quarter Performance
The final quarter of the 2024 trading year has seen the Aussie take a strong move down, losing over 7% from the annual high at 0.6942 to see it notch up an annual low just under 62 cents as we approach the final week of the year. Much of the move can be attributed to the strength that the US dollar has seen over the period which initially came from a sharp pull back in Fed rate cut expectations and has been exacerbated by Donald Trump’s election victory, but also signs that there could be a weakening in domestic data have assisted the move and have had a notable affect on the crosses as well as the major pair.
Domestic Data
Australian domestic data has continued to paint a conflicting picture over the last quarter with certain inflation indicators remaining ‘sticky’ whilst growth does appear to be slowing. The last CPI update of the year showed that inflation is retreating but wage inflation and house pricing remain elevated and that concerns the Reserve Bank to a greater extent. GDP data indicated that the economy is slowing with the last Quarterly numbers showing just a 0.3% increase against the expected 0.5%.
Reserve Bank Expectations
The RBA kept rates on hold at its last meeting and market pricing still indicates that the board will not look to start cutting rates until May 2025. This will be subject to change if data starts to indicate that the economy is slowing and that elevated rates are making a dent in inflationary conditions. The board has remained resolutely hawkish over the course of the last quarter, led by Governor Michele Bullock although there may be some cracks starting to show in recent rhetoric.
Commodity Influence
The Aussie dollar does tend to have a good correlation with the countries’ major export commodities, and we have seen this pattern continue to play out over the last quarter. The has been some lag in the correlation as always and particularly in the last few weeks as the currency sell off has gained more trajectory, however traders will continue to monitor Copper – which has fallen off recent highs from early October (although still remains 5% up on the year) and Gold which has also taken a downturn recently after hitting record highs during the quarter as well as Iron Ore which looks set to fall back under the $100 level in the coming weeks.
Geopolitical Influences
US – Without a doubt the recent changes in the US political scene have dominated the move in the AudUsd as the Republican victory and incoming government have led to a sharp rise in the dollar. In addition to inflationary pressure in the US, expectation of strong tariffs on US competitors is expected to have a significant impact on global growth which could put further pressure on the Aussie.
China – As one of Australia’s biggest trading partners and a key buyer of Australian commodities, China’s fortunes are closely tied to that of the Australian currency. The downturn in Chinese activity over the last year has led to pressure on the Aussie dollar in the last quarter and this looks likely to continue into Q1 2025 at the very least.
Technical Analysis
The Aussie dollar is looking weak from a technical perspective as well as a fundamental one now and further downside breaks could see the recent moves exacerbated into the first quarter of 2025. Support levels are likely to be challenged in the next couple of weeks and firm breaks of annual lows could see the way opened for a strong break below 60 cents. Any rallies are likely to be limited in the current environment with anything above 65 cents likely to attract strong selling interest.
Resistance 2: 0.6873 – Trendline Resistance
Resistance 1: 0.6611 – 200-Day Moving Average
Support 1: 0.6196 – 2024 Low
Support 2: 0.6169 – 2022 Low
