The Australian dollar is in an interesting spot for 2024

<p>Divergences in monetary policy often lead to long-term currency trends and that's why the Australian dollar is so interesting heading into 2024.</p><p>Most global central bankers are in the midst of a pivot and the Reserve Bank of Australia will probably follow but there is a good chance they don't. Inflation is higher in Australia, housing prices haven't fallen and the RBA 4.35% cash target rate trails the Fed and Bank of Canada.</p><p>That's why the market is betting that the RBA will be slower to cut with just 51 bps in easing priced in next year compared to 154 bps in the US.</p><p>If the global economy accelerates and particularly if China delivers some economic stimulus, then there's a good chance the RBA isn't done hiking and that would super-charge the Australian dollar. The latest RBA forecasts see them only hitting the top end of their 2-3% inflation forecast at the end of 2025, which may not be good enough for RBA Governor Michelle Bullock.</p><p>She said in November that inflation is “increasingly homegrown and demand-driven.”</p><p>The next RBA meeting isn't until February but it will be an interesting one and will include new forecasts.</p><p>Technically, AUD/USD found some support well ahead of the 2022 low and rose above the 100-week moving average this week, while also challenging some longer-term trendlines. </p><p>I think the USD side of the equation will be a risk but there's room for some broader optimism about the Aussie.</p>

This article was written by Adam Button at www.forexlive.com.