On Wednesday (February 19th), before the European market opened, the Australian dollar/US dollar recovered its losses of the day and has rebounded. However, the exchange rate still faces challenges, especially against the backdrop of US President Trump's threat to impose tariffs again, and market sentiment has become more cautious. The market is focused on the upcoming minutes of the Federal Open Market Committee (FOMC) meeting of the Federal Reserve, and it is expected that this information will further affect market sentiment.

On the Australian side, the Wage Price Index for the fourth quarter of 2024 increased by 0.7% month on month, lower than the market expectation of 0.8%, and slightly lower than the 0.9% in the previous quarter. On an annual basis, the index grew by 3.2%, consistent with expectations, but slowed down from the previous quarter's 3.6%, marking the slowest wage growth since the third quarter of 2022.

In addition, the Australian dollar is also facing further pressure from the Reserve Bank of Australia. On Tuesday, the Reserve Bank of Australia announced a 25 basis point reduction in its official cash rate (OCR) to 4.10%, marking the first rate cut in four years. Australian Federal Reserve President Michele Bullock mentioned in a post release statement that the impact of high interest rates on the economy has become apparent, but she emphasized that it is still too early to declare victory over inflation. Meanwhile, she also pointed out that the Australian job market remains strong and made it clear that despite widespread market expectations, it is uncertain whether interest rate cuts will continue in the future.

Technical analyst interpretation:

The AUD/USD is currently around 0.6360, and although the price has experienced significant fluctuations, the overall trend still remains within an upward channel range, indicating that the market is still leaning towards a bullish trend. On the 14th, the relative strength index (RSI) remained above 50, further consolidating the positive expectations of the current market. Based on the current technological situation, the Australian dollar/US dollar may test the upper track of the upward channel, which is expected to approach the psychological resistance level of 0.6400.

From the support level perspective, the current support area is mainly concentrated near two important moving averages. Firstly, the 9-day moving average (EMA) of the index has formed a strong support zone around 0.6320, which has provided effective support in recent price fluctuations multiple times. In addition, the EMA on the 14th was around 0.6300, which also provided support. With market fluctuations, if prices continue to decline, the stronger support area below will be located at the lower track of the upward channel, approximately 0.6290.

From a trend perspective, although the Australian dollar has been under fundamental pressure recently, especially from the impact of interest rate cuts and slower wage growth, technically speaking, the price is still in a relatively healthy upward channel. The existence of this channel indicates that as long as prices remain within this channel, there is still hope for a rebound in the short term, especially if there is any pullback in the US dollar or improvement in market sentiment, there may be further room for the Australian dollar/US dollar to rise.

Summary:

Despite the fundamental challenges facing the Australian dollar, particularly due to the Reserve Bank of Australia's interest rate cuts and slower wage growth, there is still uncertainty in the market regarding the future policy path. However, from a technical perspective, the Australian dollar/US dollar is still in an upward trend, and the performance of the RSI on the 14th also suggests that the market is expected to maintain some upward momentum. Pay attention to the price fluctuations between 0.6290 and 0.6400, and it is expected that the support and resistance within this range will determine the short-term market trend. If the price breaks through the psychological resistance of 0.6400, it may further challenge to higher levels.