The Australian Dollar (AUD) continued its downward slide against the US Dollar (USD) on Friday, despite earlier optimism fueled by robust labor market figures. The US Dollar’s appeal has been bolstered by the Federal Reserve’s (Fed) revised projections, indicating fewer interest rate cuts this year. This, coupled with the weaker-than-expected University of Michigan (UoM) Consumer Sentiment data, further supported the Greenback.

Economic Landscape: Aussie Faces Mixed Signals

While the Australian economy exhibits signs of weakness, persistently high inflation is likely to push the Reserve Bank of Australia (RBA) to postpone interest rate cuts, potentially limiting the Aussie’s decline. Market participants are closely watching the upcoming RBA meeting next Tuesday for further clues on monetary policy. Currently, markets aren’t pricing in a rate cut until May 2025, although risks remain tilted towards an earlier move.

Technical Analysis: AUD/USD Bearish Momentum Builds

The Relative Strength Index (RSI) has dipped below 50 and is trending downwards, signaling growing bearish momentum. The Moving Average Convergence Divergence (MACD) also shows increasing red bars, suggesting persistent selling pressure.

The short-term outlook for the AUD/USD pair has turned negative, as it broke below the 20-day Simple Moving Average (SMA), indicating waning buying interest. If this trend persists, the 100 and 200-day SMAs around 0.6560 could serve as potential support levels.