The Australian Dollar (AUD) has experienced a decline against the US Dollar (USD) for the second consecutive session, driven by market caution ahead of a crucial Federal Reserve policy decision. The likelihood of a 25 basis point rate cut by the Federal Reserve later today has added downward pressure on the Aussie. Additionally, traders are increasingly speculating that the Reserve Bank of Australia (RBA) may also implement interest rate cuts sooner than anticipated, although its decisions will remain contingent on forthcoming economic data.
The US Dollar remains robust as traders assess the potential impact of the Fed’s monetary policy adjustments. Current market expectations, as indicated by the CME FedWatch tool, suggest a near certainty of a quarter-point cut at the Fed’s upcoming December meeting. Market participants will also be closely watching the press conference by Fed Chair Jerome Powell and the Summary of Economic Projections following the meeting.
Recent economic reports reveal a mixed landscape. The U.S. Census Bureau reported a 0.7% rise in retail sales for November, an increase from the previous month’s growth of 0.5%. Conversely, in Australia, Westpac’s Consumer Confidence index fell 2% to 92.8 points in December, interrupting two months of positive development.
In China, authorities intend to target around 5% economic growth for 2025, consistent with the current year’s goal. The decision stems from discussions among senior officials at a recent Central Economic Work Conference. However, the country is grappling with substantial capital outflows, amounting to a net outflow of $45.7 billion from its capital markets in November, marking the largest monthly deficit in this area.
As for production indicators, China’s retail sales rose by 3.0% YoY in November, trailing expectations, while industrial production increased by 5.4%, slightly surpassing market forecasts. AUD/USD is currently trading around 0.6330, confined within a descending channel pattern, indicating prevailing bearish momentum. If the pair falls below the yearly low of 0.6348, it might test further downward levels near 0.6150. Resistance for the AUD/USD is anticipated around 0.6373 and 0.6397, with a significant breakout necessitating a move beyond the descending channel to potentially target higher levels.
