AUD/USD V-Shape Recovery Stalls Ahead of December High

Australian Dollar Outlook: AUD/USD

The V-shape recovery in AUD/USD seems to have stalled ahead of the December high (0.6515) as it struggles to retain the advance from the weekly low (0.6344).

AUD/USD V-Shape Recovery Stalls Ahead of December High

AUD/USD is little changed from the start of the week after registering a fresh yearly high (0.6439), and the exchange rate may consolidate over the remainder of the month as it appears to be tracking the flattening slope in the 50-Day SMA (0.6299).

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Nevertheless, data prints coming out of Australia may sway AUD/USD as the Reserve Bank of Australia (RBA) pledges to ‘rely upon the data and the evolving assessment of risks to guide its decisions,’ and the exchange rate may face increased volatility ahead of the next rate decision on May 20 as the Consumer Price Index (CPI) is anticipated to show sticky inflation.

Australia Economic Calendar

Australia’s CPI is expected to increase 0.8% in the first quarter of 2025 following the 0.2% rise during the previous period, and signs of persistent price growth may generate a bullish reaction in Australia Dollar as it encourages the RBA to further combat inflation.

At the same time, a weaker-than-expected CPI print may push the RBA to further unwind its restrictive policy, and indications of slowing price growth may drag on the Australian Dollar as Governor Michele Bullock and Co. acknowledge that ‘the continued decline in underlying inflation is welcome.’

With that said, the V-shape recovery in AUD/USD may unravel as it appears to be pulling back ahead of the December high (0.6515), but the exchange rate may continue to trade to fresh yearly highs should it defend the weekly low (0.6344).

AUD/USD Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; AUD/USD on TradingView

• AUD/USD seems to be reversing ahead of the December high (0.6515) as it struggles to close back above 0.6410 (50% Fibonacci extension), and failure to defend the weekly low (0.6344) may push the exchange rate towards 0.6240 (61.8% Fibonacci extension).
• A break/close below the 0.6130 (23.6% Fibonacci retracement) to 0.6140 (23.6% Fibonacci extension) brings the 0.5990 (78.6% Fibonacci extension) to 0.6020 (38.2% Fibonacci extension) zone on the radar, with the next area of interest coming in around 0.5930 (61.8% Fibonacci extension).
• At the same time, a breach above the weekly high (0.6439) may lead to a test of the December high (0.6515), with a break/close above the 0.6510 (38.2% Fibonacci retracement) to 0.6520 (38.2% Fibonacci extension) region opening up 0.6590 (38.2% Fibonacci extension).

Additional Market Outlooks

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--- Written by David Song, Senior Strategist

Follow on X at @DavidJSong