The AUD/USD V-shape recovery has hit a roadblock just shy of the December high (0.6515), as the Australian dollar struggles to maintain momentum above the weekly low (0.6344). This pattern reversal comes after impressive gains that previously pushed the pair to a fresh yearly high (0.6439).
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AUD/USD V-Shape Recovery: Technical Analysis and Market Outlook
The AUD/USD V-shape recovery pattern that defined early 2025 trading appears to be losing steam. After registering a new yearly high, the exchange rate has entered a consolidation phase, showing little net change from the week’s opening levels. Market technicians note the pair now seems to be tracking alongside the flattening trajectory of its 50-Day Simple Moving Average (0.6299).
Despite this pause in the AUD/USD recovery, upcoming economic indicators from Australia could reignite volatility in the pair. The Reserve Bank of Australia (RBA) has explicitly stated they will “rely upon the data and the evolving assessment of risks to guide its decisions,” putting significant importance on forthcoming economic releases.
Critical Australian CPI Data Could Impact AUD/USD V-Shape Recovery
Traders focused on the AUD/USD recovery should mark their calendars for the Australian Consumer Price Index (CPI) release and the subsequent RBA rate decision on May 20. Economists anticipate the CPI will show a 0.8% increase in Q1 2025, significantly higher than the previous quarter’s 0.2% rise.
Should inflation data exceed expectations, the AUD/USD V-shape recovery could regain momentum as persistent price pressures would likely encourage the RBA to maintain its hawkish stance on monetary policy. This scenario typically strengthens the Australian Dollar as higher interest rates attract foreign capital.
Conversely, if inflation data disappoints, the AUD/USD V-shape recovery might fully reverse as RBA Governor Michele Bullock and colleagues could signal a further unwinding of restrictive policies. The central bank has already acknowledged that “the continued decline in underlying inflation is welcome,” suggesting openness to policy easing if conditions permit.
Key Price Levels for AUD/USD V-Shape Recovery Traders
Investors tracking the AUD/USD V-shape recovery should monitor these critical technical levels:
- Upside Targets: A breakthrough above the weekly high (0.6439) could test the December high (0.6515). Further strength above the 0.6510-0.6520 zone might extend the rally toward 0.6590.
- Downside Risks: Failure to defend the weekly low (0.6344) could trigger a decline toward 0.6240. A more significant weakness might target the 0.6130-0.6140 support area, with further downside potentially reaching the 0.5990-0.6020 zone.
Bottom Line: Will the AUD/USD V-Shape Recovery Continue?
The AUD/USD V-shape recovery story remains in flux as traders balance technical resistance with fundamental catalysts. While the recovery appears to be stalling below December’s high, upcoming inflation data represents a significant inflection point that could determine whether the Australian Dollar resumes its upward trajectory or faces a more substantial correction.
For now, the AUD/USD V-shape recovery remains intact as long as support at the weekly low (0.6344) holds. However, traders should prepare for increased volatility as key economic data and central bank decisions approach in the coming weeks.
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