The Australian Dollar continues to show resilience, gaining for the fourth consecutive session against the US Dollar, significantly ahead of the Building Permits data released recently. In November 2024, Australia’s seasonally adjusted total dwelling approvals fell by 3.6% month-on-month to 14,998 units, below the anticipated contraction of 1%. This decline follows a revised gain of 5.2% in October, representing the first decrease in three months.
Attention now turns to Australia’s Monthly Consumer Price Index (CPI) set to be announced, with analysts closely watching for results that could influence monetary policy. A lower-than-expected CPI could raise the possibility of a rate cut by the Reserve Bank of Australia in February, which would likely exert downward pressure on the Australian Dollar.
Despite a hawkish turn in the US Federal Reserve’s policy stance, the Australian Dollar remains robust. The US Dollar Index, which tracks the performance of the US currency against six others, is approaching the 108.50 mark following two days of losses. Recent data showed an improvement in the US ISM Manufacturing Purchasing Managers’ Index (PMI), climbing to 49.3 in December from 48.4 the previous month, above forecasts.
Discussions among Fed officials indicate a preference to keep rates restrictive until there is reassurance that inflation is returning to the targeted 2%. Concerns about the potential economic policies of the incoming administration have added to traders’ cautious outlook, particularly regarding the prospect of tariffs that may further escalate living costs. This atmosphere of uncertainty is compounded by recent Fed projections, which suggest fewer rate cuts in 2025 amid ongoing inflationary challenges.
In related economic news, Australia’s Composite PMI was adjusted slightly upwards to 50.2, signaling consistent but modest growth in private sector output, primarily driven by the services sector. The Services PMI saw a similar adjustment, rising to 50.8. On the Chinese front, the Caixin Services PMI indicated robust growth, reflecting solid economic fundamentals even as the Manufacturing PMI displayed a softer performance.
Market dynamics remain interconnected, particularly given the close trade ties between Australia and China. Investors are cautious, keeping a wary eye on potential shifts in China’s monetary policy, with indications that the People’s Bank of China may opt for an interest rate cut in the near future.
Currently, the AUD/USD is trading around 0.6250, suggesting a prevailing bearish sentiment. However, rising indicators hint at a possible easing in bearish momentum. Traders will be looking for resistance at the upper channel boundary near 0.6280, while support levels are identified at 0.6245 and 0.6229, with critical backing near the lower boundary around the 0.6000 mark.
