09 Jan 2025

• The Australian Dollar loses ground after releasing mixed domestic data on Thursday.
• China's Consumer Price Index rose by 0.1% YoY in December, against the previous 0.2% increase.
• The US Dollar rose as the 10-year yield on Treasury bonds advanced following the FOMC Minutes release.

• The Australian Dollar (AUD) has experienced a decline for the third consecutive day against the US Dollar (USD), with the AUD/USD pair remaining close to two-year lows. This movement follows the release of domestic economic data and China's Consumer Price Index (CPI) inflation report on Thursday. Market participants are now turning their attention to the US Nonfarm Payroll (NFP) report scheduled for Friday, seeking further insights into potential policy direction.
  
  In November, Australia's trade surplus increased to 7,079 million, exceeding the anticipated figure of 5,750 million and the prior reading of 5,670 million (which was revised from 5,953 million). Exports rose by 4.8% month-on-month (MoM) in November, an increase from the revised 3.5% in October. Conversely, imports saw a growth of 1.7% MoM in November, compared to a revised figure of 0% in the previous month.

  Australia's Retail Sales, an important measure of consumer expenditure, rose by 0.8% month-on-month in November, an increase from the 0.5% growth observed in October (which was revised from 0.6%). Nevertheless, this figure did not meet market forecasts, which had predicted a 1.0% increase.
  
  The Australian dollar is encountering difficulties as China's Consumer Price Index (CPI) data indicates rising deflationary pressures. The annual inflation rate saw a modest increase of 0.1% in December, slightly below the 0.2% rise recorded in November, which was in line with market predictions. On a month-on-month (MoM) basis, CPI inflation remained stable at 0% in December, consistent with estimates, following a 0.6% decrease in November. Any shifts in the economic landscape of China could have repercussions for the Australian markets, given the close trading relationship between the two countries.

  Australian Dollar extends losses due to increased hawkish sentiment surrounding Fed

  The US Dollar Index (DXY), which assesses the performance of the US Dollar (USD) against six prominent currencies, is currently positioned near 109.00. The Greenback has found support from the hawkish tone of the Federal Open Market Committee (FOMC) Meeting Minutes and apprehensions regarding tariff strategies from the forthcoming Trump administration.
  
  The US Dollar has appreciated as the yield on 10-year US Treasury bonds rose to approximately 4.73% in the previous session, now at 4.67%, while the 30-year yield neared 4.93%.
  
  The FOMC Minutes from the December meeting indicated that a majority of participants favored a 25 basis point reduction but remained vigilant, considering potential shifts in trade and immigration policies that could extend the period of high inflation.
  
  Initial Jobless Claims in the US decreased to 201,000 for the week ending January 3, surpassing the consensus estimate of 218,000. Additionally, the ADP Employment Change recorded an increase of 122,000 in December, although this figure fell short of the anticipated 140,000.
  
  The US ISM Services PMI rose to 54.1 in November, up from 52.1, exceeding the market forecast of 53.3. The Prices Paid Index, indicative of inflation, saw a notable increase to 64.4 from 58.2, while the Employment Index experienced a slight decline to 51.4 from 51.5.
  
  As reported by Bloomberg, Raphael Bostic, President of the Federal Reserve Bank of Atlanta, remarked on Tuesday that Federal Reserve officials should proceed with caution regarding policy decisions due to inconsistent progress in curbing inflation. Bostic underscored the importance of maintaining elevated interest rates to achieve price stability objectives.

  Richmond Fed President Thomas Barkin emphasized on Friday that the benchmark policy rate should continue to be restrictive until there is increased assurance that inflation will revert to the 2% target. In addition, Fed Governor Adriana Kugler and San Francisco Fed President Mary Daly highlighted the difficult balancing act that US central bankers face as they strive to decelerate the pace of monetary easing this year.
  
  The Australian Dollar encountered difficulties as the trimmed mean, a key indicator of core inflation, decreased to an annual rate of 3.2% from 3.5%, moving closer to the Reserve Bank of Australia's (RBA) target range of 2% to 3%. Currently, traders are estimating a 55% likelihood that the RBA will reduce its cash rate by 25 basis points to 4.35% in February, with a complete quarter-point cut anticipated by April.
  
  In November, Australia's monthly Consumer Price Index (CPI) increased by 2.3% year-over-year, exceeding the market expectation of 2.2% and reflecting an uptick from the 2.1% rise recorded in the preceding two months. This represents the highest reading since August. Nevertheless, the figure remains within the RBA’s target range of 2–3% for the fourth consecutive month, supported by the ongoing effects of the Energy Bill Relief Fund rebate.

  Australian Dollar hovers around 0.6200, next barrier appears at nine-day EMA

  The AUD/USD pair is currently positioned close to 0.6200 on Thursday, sustaining a bearish sentiment as it continues to operate within a descending channel on the daily chart. The 14-day Relative Strength Index (RSI) is slightly above 30, indicating the possibility of an increase in bearish momentum.
  
  Should the pair decline further, it may approach the lower limit of the descending channel, which is approximately at the 0.5980 mark.
  
  Immediate resistance is identified near the nine-day Exponential Moving Average (EMA) at 0.6220, followed by the 14-day EMA at 0.6234. A more significant resistance level is located near the upper boundary of the descending channel, around 0.6260.