Australian Dollar drops to fresh low since January, further below 0.6850 vs bullish USD

• AUD/USD attracts sellers for the third straight day as the USD extends the post-US CPI rally.
• Firming Fed rate hike expectations and geopolitical risks lift the USD to April 2025 highs.
• The RBA’s dovish tilt further weighs on the Aussie and backs the case for additional losses.

The AUD/USD pair drifts lower for the third straight day, also marking the fifth day of a negative move in the previous five, hitting a fresh low since January during the early European session on Thursday. Spot prices currently trade around the 0.6830 region, down 0.25% for the day, and seem vulnerable amid a combination of negative factors.

The Australian Dollar (AUD) has been underperforming following the Reserve Bank of Australia’s (RBA) dovish interest rate hike earlier this November, which came with a 6-3 vote split and the removal of explicit further-tightening guidance. The US Dollar (USD), on the other hand, extends its rally for the third straight day amid the growing acceptance that the US Federal Reserve (Fed) will raise borrowing costs again in December, further exerting pressure on the AUD/USD pair.

The bets were reaffirmed by hotter-than-expected October US consumer inflation figures, released on Tuesday, and hawkish comments from several Fed officials. Moreover, traders have started pricing in the possibility of a jumbo 50-basis-point (bps) rate increase next month, which, along with geopolitical risks stemming from the US-Iran standoff over the Strait of Hormuz, further underpins the safe-haven Greenback and validates the near-term negative outlook for the AUD/USD pair.

In fact, US forces reportedly carried out a series of strikes on Iran's Qeshm Island, while Tehran attacked ship navigation systems on the Omani island of Didamar, located at the entrance of the Persian Gulf. Moreover, Iran's Armed Forces Deputy Chief of Staff Brigadier General Kioumars Heidari said that Tehran has closed the strategic waterway and will not open it except by the order of the leader of the revolution, tempering hopes for a diplomatic resolution to end the ongoing conflict.

Traders now look to the release of the Weekly Initial Jobless Claims data from the US, which, along with Fed speak and further developments surrounding the Middle East crisis, might influence the buck and provide some impetus to the AUD/USD pair. Nevertheless, the fundamental backdrop seems tilted firmly in favor of bearish traders, suggesting that any attempted recovery could be sold into and is more likely to fizzle out rather quickly.

AUD/USD daily chart

Technical Analysis

The AUD/USD pair extends a bearish near-term bias following the recent failed attempt to find acceptance above the 100-day Simple Moving Average (SMA) at 0.7026 and a break below the 0.6900 mark. The latter forms the first meaningful resistance, and spot prices would need to reclaim this level to ease the immediate bearish tone and aim to retest the 100-day SMA at 0.7026.

(The technical analysis of this story was written with the help of an AI tool. Know more.)