CITIZENS COMPASS– The Australian Dollar (AUD) extends its gains against the US Dollar (USD) on Wednesday, after registering more gains in the previous session.
The AUD/USD pair strengthened as the US Dollar weakened following softer-than-expected US inflation data.
Australia’s seasonally adjusted Wage Price Index rose by 3.4% year-over-year in Q1 2025, up from a 3.2% increase in Q1 2024 and surpassing market forecasts of a 3.2% gain. This marks a recovery from the prior quarter, which recorded the slowest wage growth since Q3 2022. On a quarterly basis, the index climbed 0.9% in Q1, surpassing the projected 0.8% rise.
Australian Prime Minister Anthony Albanese was sworn in for a second term on Tuesday after a decisive election victory. Key cabinet positions—including treasurer, foreign affairs, defense, and trade—remain unchanged. Albanese is scheduled to attend the inauguration Mass of Pope Leo XIV in Rome on Sunday, where he will also meet with leaders such as European Commission President Ursula von der Leyen to discuss trade relations.
US President Donald Trump said that he is working to gain greater access to China, describing the relationship as excellent and expressing willingness to negotiate directly with President Xi on a potential deal.
Easing global trade tensions have prompted investors to dial back expectations for aggressive interest rate cuts in Australia. Markets now project the Reserve Bank of Australia (RBA) to reduce the cash rate to approximately 3.1% by year-end, a revision from earlier forecasts of 2.85%. Nevertheless, the RBA is still widely expected to proceed with a 25 basis point cut at its upcoming policy meeting.
The AUD/USD pair is trading near 0.6470 on Wednesday. Technical analysis of the daily chart indicates a bullish outlook, with the pair trading above the nine-day Exponential Moving Average (EMA). Furthermore, the 14-day Relative Strength Index (RSI) has also surpassed the 50 mark, reinforcing the bullish sentiment.
The AUD/USD pair could retest the six-month high of 0.6515, recorded on December 2, 2024. A sustained break above this level may pave the way for a move toward the seven-month high of 0.6687 from November 2024.
On the downside, the AUD/USD pair is likely to test the nine-day EMA at 0.6433, followed by the 50-day EMA around 0.6353. A decisive break below these levels could weaken the short- and medium-term price momentum and open the door for a decline toward 0.5914, a level not seen since March 2020.
—Forex News
