Australian Dollar drifts near yearly support as holiday trade thins

• Aussie dips to 0.6215 on a quiet Friday session.
• Year-end lull keeps markets subdued.
• RBA dovish bets rise amid easing inflation and mixed economic outlook.

The Australian Dollar pair trades in a very tight range near the yearly support of 0.6200 in Friday's session. The Aussie struggles for direction as global market activity remains muted, with traders largely focused on New Year festivities. Thin liquidity and lingering policy uncertainties contribute to the currency's softness.

Daily digest market movers: Aussie continues soft and struggles to gain traction, USD strength

• December's highlight was that the US Federal Reserve cut rates by 25 basis points but Chair Jerome Powell highlighted cautious further easing as inflation remains stubborn. In addition, the bank showed that it now sees less cuts than expected in 2025.
• To add to that, potential new tariffs under the incoming Trump administration could stoke higher prices, tempering the pace of Fed rate reductions into 2025.
• Market participants weigh Trump's proposed deregulation, tax cuts, and potential tariff hikes, which could boost US growth and inflation, favoring a stronger USD.
• The Australian Dollar remains pressured as RBA minutes show officials confident in easing inflation, paving the way for potential rate cuts as soon as February.
• RBA Governor Michele Bullock reiterated a data-driven approach, underscoring no explicit discussion of a February rate cut, though odds stand at 65%.

AUD/USD technical outlook: Aussie extends losses as oversold signals build

The AUD/USD declined to 0.6215 on Friday, hovering near its yearly low. The Relative Strength Index (RSI) sits at 27, signaling deeper oversold territory with a mild downward bias. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram prints flat red bars, indicating persistent selling pressure. Despite the pair's extended losses, thin holiday trading volumes could limit any pronounced move, leaving the Aussie vulnerable to further downside without a clear catalyst.