Australian Dollar treads water below three-week highs on positive market sentiment

• Australian Dollar could gain ground on the positive sentiment.
• Australia’s Dollar tests three-month highs toward the 0.6600 level.
• RBA Governor Bullock’s remarks support the Aussie pair.
• US Dollar seems to halt the losses as US bond yields improve.

The Australian Dollar (AUD) could continue the winning streak for the third successive session on Monday. The AUD/USD pair hovers below the three-month high at 0.6590, and received upward support from the negative tone surrounding the US Dollar (USD). This negative sentiment has been influenced by the mixed S&P Global PMI data, contributing to the Aussie pair's strength.

Australia's Dollar experienced a boost in response to positive market sentiment, driven by news of continued stimulus in the Chinese property market. This has improved investors' mood, as reflected in the positive performance of equity markets.

Furthermore, the recent hawkish comments from Reserve Bank of Australia (RBA) Governor Michele Bullock are providing support for the Aussie pair. Bullock emphasized that the inflation challenge is increasingly driven by domestic demand, underscoring that monetary policy tightening is the appropriate response to demand-driven inflation.

US Dollar Index (DXY) attempts to snap the recent losses as US Treasury yields show improvement. This comes amid speculations that the US Federal Reserve (Fed) might ease monetary policy next year. However, Fed officials' comments last week hinting at the need for further tightening, they also emphasized that decisions would depend on incoming data to take appropriate measures to address inflation concerns.

Busy week ahead for Australia and the United States on the economic front. RBA Bullock's speech, retail sales, and inflation figures will likely be closely watched in Australia, providing insights into the potential monetary policy considerations. In the United States (US), Gross Domestic Product Annualized (Q3), Core PCE - Price Index, and the ISM Manufacturing PMI will be key indicators.

Daily Digest Market Movers: Australian Dollar seems to move on an upward trajectory on hawkish RBA

• RBA's meeting minutes revealed that the board acknowledged a "credible case" against an immediate rate hike but considered the case for tightening stronger due to increased inflation risks. The decision on further tightening would hinge on data and risk assessment.
• National Australia Bank (NAB) anticipates another RBA rate hike, expecting it to occur at the February 2024 meeting.
• The Federal Open Market Committee (FOMC) meeting minutes revealed that members would further entertain the idea of tightening monetary policy if incoming information suggests insufficient progress toward the Committee's inflation objective.
• FOMC members unanimously agree that policy should stay restrictive for some time until there is clear and sustainable evidence of inflation moving down toward the Committee's target.
• US S&P Global Composite PMI for November shows it remained unchanged at 50.7. The Services PMI increased to 50.8 in November from 50.6 in October, surpassing the market consensus of 50.4. However, the Manufacturing PMI eased to 49.4 from 50.0, falling short of the 49.8 estimated.

Technical Analysis: Australian Dollar hovers below the three-month highs aligned to 0.6600 psychological level

The Australian Dollar hovers around the 0.6580 level on Monday, just below the three-month high reached at 0.6590 on Friday, which aligns with the psychological resistance of the 0.6600 level. On the downside, the seven-day Exponential Moving Average (EMA) at 0.6550 could serve as crucial support, followed by the 23.6% Fibonacci retracement at 0.6513. If the pair falls below this level, it may test the major support at the 0.6500 level.

AUD/USD: Daily Chart