Daily Price Outlook
During the European trading session, the AUD/USD currency pair continued its upward movement, holding steady around the 0.6285 level and even reaching a high of 0.6288, despite weaker-than-expected Building Permits data for November.
However, the rise in the Australian dollar can largely be attributed to the overall positive market sentiment, which tends to favor riskier assets like the Aussie.
Nevertheless, the strength of the US dollar, driven by the Federal Reserve’s hawkish stance, kept a lid on further gains for the AUD/USD pair.
Looking ahead, traders are eyeing the US ISM Services PMI report due later today, with the market also focused on the Federal Reserve’s December meeting minutes set to be released on Wednesday.
Australia's Economic Weakness and China's Uncertainty Pose Risks to AUD/USD Pair
On the data front, Australia’s Building Permits for November 2024 showed a 3.6% month-on-month decline, falling short of the expected 1.0% decrease. This came after a 5.2% rise in October, marking the first decline in three months.
On Wednesday, all eyes will be on Australia’s Monthly Consumer Price Index (CPI) for November. If the data comes in lower than expected, it could increase the chances of a rate cut by the Reserve Bank of Australia (RBA) in February, which could put downward pressure on the Australian dollar.
In China, the services sector showed strong growth in December. The Caixin China Services PMI rose to 52.2, higher than the expected 51.7, signaling the fastest growth since May.
However, the Caixin Manufacturing PMI dropped to 50.5, missing forecasts. China’s economic resilience is seen in reports of continued market openness, with the Shanghai Stock Exchange discussing plans to deepen the opening of capital markets. These economic changes in China often affect Australia due to their close trade ties.
Furthermore, the Judo Bank Australia Composite PMI for December 2024 was revised higher to 50.2, indicating modest growth in the private sector, with the services sector leading the way.
Meanwhile, the services sector in Australia has now grown for the eleventh consecutive month. The People’s Bank of China (PBoC) also hinted at an interest rate cut in the near future, a move that could further influence the Australian economy due to the close trade relationship between the two countries.
Therefore, the weaker-than-expected Australian data, along with potential rate cuts by the RBA and economic uncertainty in China, could put downward pressure on the AUD. This may limit gains for the AUD/USD pair, especially with a strong US dollar.
AUD/USD – Technical Analysis
AUD/USD is trading at $0.62702, gaining 0.41% in the past 24 hours, as the pair builds momentum above the pivot point at $0.62433.
On the 4-hour chart, the price action reflects bullish sentiment, with the Relative Strength Index (RSI) at 61, indicating moderate strength.
The 50-day Exponential Moving Average (EMA) at $0.62250 provides a solid support base, aligning with the pivot point to sustain the upward trajectory.
Immediate resistance lies at $0.63058, and a break above this level could open the door for further gains toward $0.63393 and $0.63835. These targets align with key Fibonacci retracement levels, enhancing the bullish outlook.
On the downside, immediate support is seen at $0.61979, followed by $0.61616 and $0.61208. A breach below $0.61979 could expose the pair to additional downside risks, challenging the current bullish momentum.
The technical structure indicates a favorable setup for buyers, with the pair holding above the 50 EMA and pivot point.
A sustained move above $0.63058 would confirm the bullish trend, while a failure to maintain this level could trigger consolidation or a pullback.
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