The Australian dollar (AUD) struggled to recover early Tuesday, trading below 0.6250 against the US dollar (USD), as investors reacted to the dovish tone of the Reserve Bank of Australia's (RBA) December meeting minutes. The minutes revealed a growing confidence that inflation risks have diminished, reinforcing market bets for a potential rate cut as early as February 2025.

Additionally, concerns over China's fragile economic recovery and lingering US-China trade tensions further pressured the Aussie, keeping the currency pair near multi-year lows. Analysts highlighted immediate support at 0.6220, with a break below potentially exposing the psychological level of 0.6200. On the upside, resistance is seen at 0.6280, requiring a sustained break above to trigger bullish momentum.

AUDUSD DAILY CHART

RBA's Policy and Economic Landscape

The RBA minutes underscored a cautious optimism, with policymakers noting that inflation appears to be on track to meet targets sustainably. The central bank held the Official Cash Rate (OCR) steady at 4.35% during its December 10 meeting, marking the ninth consecutive decision to maintain rates. This came against the backdrop of soft third-quarter GDP data, fueling speculation about a February rate cut.

Governor Michele Bullock emphasized the importance of a data-driven approach, stating, "I honestly don’t know if we’re going to be cutting in February." The central bank's revised guidance removed previous neutrality, signaling a shift in tone. Markets are now pricing in a 65% probability of a 25 basis point cut in February, with full expectations for April.

The AUD/USD's trajectory remains heavily influenced by upcoming US economic data and further developments from the RBA. Investors will closely monitor these factors to assess the pair's next significant move.