The Australian Dollar is showing resilience as the AUD/USD pair defends its 2022 low of 0.6170, extending a series of higher highs and lows from last week. However, the currency pair remains below the 50-day Simple Moving Average (SMA) at 0.6432, suggesting potential challenges to sustained upward momentum.

Technical Analysis: AUD/USD at a Crossroads

The recent recovery in AUD/USD has pulled the Relative Strength Index (RSI) back above 30, signaling a moderation of bearish momentum as the indicator moves away from oversold territory. This technical shift could pave the way for a further retracement of the decline from the December high of 0.6515.

Key levels to watch include:

• Support: 0.6170 (2022 low) and 0.6130 (23.6% Fibonacci retracement).
• Resistance: 0.6318 (November 2023 low), 0.6380–0.6410 (78.6% Fibonacci retracement zone), and the 50-day SMA at 0.6432.

A sustained move above the 50-day SMA could open the door to higher levels near 0.6510–0.6520, aligning with key Fibonacci retracement zones. Conversely, a failure to hold above 0.6240–0.6270 could stall the recovery, potentially pushing AUD/USD toward the psychologically significant 0.6000 handle.

Economic Data and RBA Outlook

The Australian Consumer Price Index (CPI) will play a pivotal role in shaping the AUD/USD outlook. November’s CPI is expected to rise to 2.2% year-over-year, up from 2.1% in October. Persistent inflation could prompt the Reserve Bank of Australia (RBA) to maintain restrictive monetary policy as it aims to steer inflation toward its target range.

A stronger than expected CPI reading may support the Australian Dollar, reinforcing the view that the RBA will stay the course at its first meeting of 2025. Conversely, a weaker inflation figure could reignite speculation about potential policy adjustments, which might weigh on AUD/USD.

Near-Term Outlook: Bullish, but Cautious

AUD/USD is currently trading at a fresh monthly high of 0.6302, fueled by a three-day rally. A move back above 0.6318(November 2023 low) could bolster the pair’s recovery, raising the likelihood of a test of the 0.6380–0.6410 zone. However, the pair’s ability to sustain upward momentum will depend on its capacity to breach key resistance levels and maintain its position above the 50-day SMA.

Failure to do so could see AUD/USD retest critical support at 0.6170 (2022 low). A break below this level might lead to a deeper decline toward 0.5990–0.6020, representing key Fibonacci extension levels.

Broader Market Implications

The Australian Dollar’s performance will also depend on broader market trends, including U.S. Federal Reserve policy and global risk sentiment. Traders should closely monitor upcoming data releases and technical levels as AUD/USD navigates a pivotal phase.