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The US dollar is waiting for the Fed's starting gun, but the Australian dollar has already surged: Who is making the big move?
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market Analysis]: The US dollar is waiting for the Federal Reserve's starting gun, but the Australian dollar has already surged first: Who is playing the next big game?". Hope this helps you! The original content is as follows:
Tuesday, December 9th. The Australian dollar traded around 0.6635 against the US dollar during the European session. After a brief dip after the release of the Reserve Bank of Australia's interest rate decision and policy statement, it gradually stabilized and recovered, showing the market's re-evaluation of the outlook for Australia's monetary policy. At the same time, the Federal Reserve is about to announce its latest interest rate decision, which has become the core variable that dominates the direction of the US dollar.
The Reserve Bank of Australia kept the cash rate unchanged at 3.60%, marking the third consecutive time on hold, in line with market consensus. However, the tone of its policy statements was decidedly hawkish. The official clearly stated that "inflation risks have turned upward" and deleted the previous statement that there was two-way uncertainty in the policy path. This wording adjustment was widely interpreted by the market as a signal of further tightening of the policy stance. More importantly, Michelle Bullock, chairman of the Reserve Bank of Australia, bluntly said at the press conference after the meeting: "I think there is no possibility of an interest rate cut in the foreseeable future." She further emphasized that the current focus of policymakers is not whether to cut interest rates, but "whether we will enter a new round of interest rate hikes." This statement quickly changed the market's pricing logic for Australia's interest rate outlook. According to the implicit expectations of the interest rate futures market, the probability of a cumulative 50 basis point interest rate hike in the next twelve months has increased significantly. The market has advanced the timing of the first interest rate hike to the second quarter of the following year, that is, around June 2026. The shift reflects a narrowing gap between policymakers and traders on the direction of inflation and an attempt by the Reserve Bank of Australia to manage expectations through forward guidance and avoid excessive volatility in financial markets.
In contrast, the U.S. policy environment is still focused on the Federal Reserve’s upcoming interest rate decision. HeadThe current market focus is on the Fed's hints on the follow-up path. If the statement shows weakening confidence in the downward trend of inflation, or raises expectations for long-term neutral interest rates, it may support the strength of the U.S. dollar; conversely, if a signal is released that leaves room for future easing, the U.S. dollar may face correction pressure. The current ten-year U.S. Treasury bond yield is stable around 4.15%, indicating that the market has a certain consensus that interest rates have peaked, but a clear downward trend has not yet formed. In this environment, the trend of the Australian dollar against the US dollar essentially reflects the game of the relative paths of the two countries' monetary policies. Although Australia's domestic inflation data has been higher than expected for many consecutive months, supporting its hawkish stance, its economic expansion momentum is slightly weak, and both the real estate market and consumer spending growth are facing certain constraints. Therefore, even if the Reserve Bank of Australia releases the possibility of raising interest rates, the market is still weighing whether its real economy can withstand the impact of further tightening.
Market Performance
The Australian dollar against the US dollar experienced a typical "fall first and then rise" trend after the announcement of the RBA decision. Initially, because the first draft of the policy statement did not immediately rule out the option of cutting interest rates, some programmed transactions and short-term funds chose to take profits, pushing the exchange rate down to 0.6610 in the short term. However, as the chairman of the Reserve Bank of Australia clearly xm-forex.communicated at the press conference that "there is no room for near-term interest rate cuts" and did not rule out raising interest rates, the market quickly corrected pricing, and the Australian dollar rebounded to around 0.6650 against the US dollar.
Looking at the daily structure, the Australian dollar against the U.S. dollar has recently risen from the lows around 0.6420, forming higher lows and higher highs. The short-term upward rhythm is relatively consistent, and the current price has approached the previous high density area. Near 0.6648 is a significant wave peak in recent times, forming a short-term pressure zone; the 0.6540 line below is the key level on the chart, which has both early consolidation area and retracement reference significance. In terms of indicators, MACD is above the zero axis, DIFF and DEA are in a bullish arrangement. The column enlargement shows that the kinetic energy is still strong, but the slope changes need to be paid attention to; the RSI is around 66, which is in a relatively strong zone and has not yet become extreme, indicating that the upward kinetic energy is dominant but high fluctuations may occur in the short term. Overall, the daily strong repair pattern continues, and the upward pressure and marginal changes in kinetic energy will jointly affect the subsequent rhythm.
Outlook level
Some analysts pointed out that the hawkish signal sent by the Reserve Bank of Australia at this meeting was stronger than expected, especially in the context of the global economy generally moving towards an easing cycle. Australia has become one of the few major economies that still retains the possibility of raising interest rates, which provides relative interest rate support for its currency. However, some have reservations and believe that the current rebound in inflation is partly driven by temporary factors, such as energy price fluctuations and rising insurance costs, and does not necessarily need to be addressed through monetary policy. Therefore, what really determines whether the Australian dollar against the US dollar can break through the current range is still the change in the US dollar market caused by the attitude of the Federal Reserve and the direction of its monetary policy.
Taken together, the current dominant logic in the foreign exchange market still revolves around the policy divisions of major central banks around the world. Although the Reserve Bank of Australia did not take immediate action, its stance has quietly changed.Trigger market repricing. The rebound of the Australian dollar against the US dollar from lows is not only a technical response to the adjustment in interest rate expectations, but also reflects the market's initial pricing of premiums for "major central banks that may raise interest rates." However, this process is not yet xm-forex.complete and is highly dependent on external environment cooperation. The outcome of tomorrow's Fed decision and the tone of its post-meeting statement will be a key catalyst in determining the direction of the short-term exchange rate. If the Fed is dovish, the Australian dollar is expected to challenge the key resistance of 0.6700; if the Fed is unexpectedly hawkish, it may trigger a sell-off in risk assets and drag down the Australian dollar. In addition, attention needs to be paid to the continuity of Australia's own economic data, especially employment and consumer confidence indicators, which will affect the market's judgment on the necessity of raising interest rates. At present, the Australian dollar against the US dollar is still in a relatively balanced state of long and short forces, lacking the motivation for a unilateral breakthrough, and is more manifested in a oscillating pattern surrounding policy expectations.
The above content is all about "[XM Foreign Exchange Market Analysis]: The U.S. dollar is waiting for the Federal Reserve's starting gun, but the Australian dollar has already surged first: who is making the next big move?" It was carefully xm-forex.compiled and edited by the XM foreign exchange editor. I hope it will be helpful to your trading! Thanks for the support!
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