15 Jan 2025

• The Australian Dollar receives support from improved market sentiment and strong commodity prices.
• The AUD gained ground from robust trade data from China and Beijing's initiatives to stabilize the Yuan.
• The US Dollar depreciated following the disappointing US December PPI data; CPI inflation data will be eyed on Wednesday.
• The Australian Dollar (AUD) remained stable on Wednesday following two days of gains against the US Dollar (USD). The AUD/USD pair was positively influenced by a risk-on market atmosphere, which was underpinned by robust trade statistics from China, efforts by Beijing to stabilize the Yuan, and increasing commodity prices. Market participants are looking forward to the release of Australian employment data later this week, which may provide further clarity on the policy direction of the Reserve Bank of Australia (RBA).
  
  Investor sentiment improved as US President-elect Donald Trump's economic team contemplated a gradual rise in import tariffs. This optimism enhanced the appeal of risk-sensitive currencies such as the AUD and contributed to the strengthening of the AUD/JPY pair.
• Traders evaluated data indicating a second consecutive monthly decrease in consumer confidence, likely influenced by the depreciation of the Australian Dollar against the US Dollar. In January 2025, Australia’s Westpac Consumer Confidence Index fell by 0.7% to 92.1 points, signifying persistent consumer pessimism.
  
  This decline in consumer confidence has raised concerns regarding the future of interest rates and the overall economic health of Australia. Currently, markets are anticipating a 67% probability that the Reserve Bank of Australia will reduce its cash rate of 4.35% by 25 basis points in February, with a complete rate cut projected by April.
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• The US Dollar Index (DXY), which evaluates the performance of the US Dollar against six prominent currencies, is currently trading around 109.20. The Greenback encountered difficulties following the underwhelming Producer Price Index (PPI) data for December. Market observers are now focused on the upcoming Consumer Price Index (CPI) inflation data, scheduled for release later on Wednesday.
  
  In December, the US Producer Price Index for final demand increased by 0.2% month-over-month, following an unchanged rise of 0.4% in November, which was below the anticipated 0.3%. Year-over-year, the PPI rose by 3.3% in December, marking the highest increase since February 2023, after a 3.0% rise in November. This figure fell short of the consensus estimate of 3.4%.
  
  The US Nonfarm Payrolls (NFP) saw an increase of 256,000 in December, significantly surpassing market expectations of 160,000 and exceeding the revised November figure of 212,000 (previously reported as 227,000).
  
  Michelle Bowman, a member of the Federal Reserve Board of Governors, joined other Fed officials last week in addressing market reactions to a tighter pace of rate cuts anticipated in 2025, which is more aggressive than many market participants had expected.
  
  Kansas Fed President Jeffrey Schmid made headlines on Thursday by stating that most of the Federal Reserve's mandated objectives have recently been met. He highlighted the necessity of reducing the Fed's balance sheet, indicating that interest rate policy is nearing its long-term equilibrium. Schmid remarked that any future rate cuts should be implemented gradually and based on economic data.
  
  On Monday, the China Foreign Exchange Committee (CFXC) committed to supporting the Chinese Yuan during a meeting in Beijing, which was conducted under the auspices of the People’s Bank of China (PBOC). Additionally, the PBOC and the State Administration of Foreign Exchange (SAFE), China’s foreign exchange regulator, announced an increase in the macro-prudential adjustment parameter for cross-border financing from 1.5 to 1.75, effective January 13, 2025.
  
  PBOC Governor Pan Gongsheng stated on Monday that "interest rate and reserve requirement.

• Australian Dollar remains below 0.6200, descending channel’s upper boundary

• The AUD/USD pair is currently trading at approximately 0.6190 on Wednesday, sustaining a bearish trend as it operates within a descending channel on the daily chart. The 14-day Relative Strength Index (RSI) remains above the 30 threshold, suggesting a recovery from previously oversold conditions.
  
  Immediate resistance for the AUD/USD pair is identified at the nine-day Exponential Moving Average (EMA) at 0.6193, followed by the 14-day EMA at 0.6207. A more substantial resistance level is located near the upper boundary of the descending channel, around 0.6220.
  
  In terms of support, the AUD/USD pair may approach the lower boundary of the descending channel, which is near the 0.5940 level.