Daily Price Outlook
Despite the downbeat Chinese Manufacturing PMI putting pressure on the Aussie Dollar, the AUD/USD currency pair managed to maintain its upward trend, staying well-supported around the 0.6215 level and even reaching an intra-day high of 0.6223.
However, the reason behind this rise can be traced back to the Reserve Bank of Australia's (RBA) comments.
The RBA board suggested that if future economic data aligns with or falls below expectations, it would strengthen confidence in inflation and create the right conditions to begin easing policy restrictions.
On the other hand, stronger-than-expected data might mean that restrictive policies need to stay in place longer.
RBA Governor Michele Bullock also pointed out that the continued strength of the labor market has made the RBA slower than other countries in beginning its monetary easing cycle.
Weaker Chinese Manufacturing PMI Puts Pressure on AUD/USD Amid Global Economic Uncertainty
On the data front, China's Caixin Manufacturing PMI unexpectedly dropped to 50.5 in December, down from 51.5 in November.
The market had expected a reading of 51.7 for the month. Despite the decline, the data still indicates expansion, with manufacturers' output and demand continuing to grow.
The output gauge stayed in expansion for the 14th straight month, and new orders increased for the third consecutive month.
However, growth in both output and new orders slowed compared to November, as production and sales of investment goods fell, and exports were weaker due to ongoing uncertainties in the global economy and trade.
In addition to the Caixin PMI data, China's official Manufacturing PMI, released by the National Bureau of Statistics (NBS), also showed a slowdown, easing to 50.1 in December from 50.3 in November.
This missed market expectations of 50.3. On a positive note, the Non-Manufacturing PMI rose to 52.2, higher than the 50.0 in November and the forecast of 50.2.
Overall, while manufacturing growth slowed, the non-manufacturing sector showed stronger performance, pointing to mixed economic conditions in China as it faces challenges from both domestic and international factors.
Therefore, the weaker-than-expected Chinese Manufacturing PMI data signals economic challenges, which could dampen demand for commodities and impact Australia's export-driven economy.
As a result, the AUD/USD pair may face downward pressure, reflecting concerns about slowing global growth.
US Dollar Strengthens Amid Fed's Hawkish Stance and Global Uncertainties
On the US front, the US Dollar Index (DXY) has surged to multi-year highs, trading around 108.50. This rise is largely due to the US Federal Reserve’s hawkish stance on interest rates.
The Fed has signaled that it may take a more cautious approach to rate cuts in 2025, which has strengthened the US Dollar.
The shift in policy comes as the market anticipates economic strategies from the incoming Trump administration, which creates uncertainty about future policy changes.
In addition to the Fed's stance, rising geopolitical tensions in the Middle East and the ongoing Russia-Ukraine war are expected to support the US Dollar in the short term.
As a safe-haven currency, the USD tends to strengthen during times of global instability. Traders are also cautious about President-elect Trump’s economic policies, particularly the possibility of higher tariffs, which could increase the cost of living.
These concerns, along with the Fed’s recent projections indicating fewer rate cuts in 2025, suggest that the US Dollar will continue to hold its strength due to ongoing inflationary pressures and global uncertainties.
AUD/USD – Technical Analysis
The AUD/USD pair is trading at $0.62044, up 0.24% in the last session, showing a modest recovery from recent lows. The 4-hour chart positions the pivot point at $0.62433, serving as a key level for traders.
Immediate resistance is seen at $0.62755, followed by $0.63058 and $0.63393, highlighting potential upside targets. On the downside, key support levels are positioned at $0.61845, $0.61496, and $0.61208, providing safety nets against selling pressure.
The Relative Strength Index (RSI) at 46 suggests a neutral stance, signaling room for directional moves. The 50 EMA at $0.62185 reinforces a short-term bearish bias as the price remains below this level.
A sustained move below the $0.62203 entry point may trigger additional selling, with a potential target at $0.61693. Conversely, a break above $0.62433 could open the door to a recovery, targeting the $0.62755 resistance zone.
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