Australian Dollar maintains its position below a major level post recent losses

• Australian Dollar trades higher on improved risk appetite and hawkish RBA.
• Australian central bank will observe data to evaluate the risks before making future policy decisions.
• US Dollar faces negative sentiment due to speculation on the Fed’s rate cuts in early 2024.

The Australian Dollar (AUD) retraces its recent losses on Thursday after pulling back from a five-month high at 0.6779. The US Dollar (USD) gained ground against the Aussie Dollar in the previous session on the back of improved economic data from the United States (US). Consequently, the AUD/USD pair snapped its five-day winning streak.

Australia's central bank takes a hawkish stance, as indicated in the Meeting Minutes on Tuesday, providing a boost to the Australian Dollar. The Reserve Bank of Australia (RBA) is expected to carefully scrutinize additional data to evaluate the balance of risks before making future interest rate decisions. According to the World Interest Rate Probability Tool (WIRP), there's widespread anticipation that the RBA will refrain from a rate cut in February's policy meeting.

The US Dollar Index (DXY) loses ground on Thursday despite improved US Treasury yields. Additionally, the dovish sentiment surrounding the US Federal Reserve’s (Fed) interest rate trajectory in early 2024 put pressure on the US Dollar. However, Fed officials discouraged premature speculations and urged a cautious approach.

US Existing Home Sales Change showed a monthly rate increase of 0.8% in November, a notable turnaround from the previous decline of 4.1%. CB Consumer Confidence for December experienced substantial growth in December, marking the most significant increase since early 2021, rising from 101.0 to 110.07.

Daily Digest Market Movers: Australian Dollar remains bullish on improved risk sentiment

• Westpac Leading Index (MoM) for November improved by 0.01% against the previous reading of flat 0.0%.
• Australia’s preliminary Judo Bank Composite PMI improved to 47.4 from the previous reading of 46.2.
• The Manufacturing PMI registered 47.8, a slight increase from the prior figure of 47.7.
• The Services PMI grew to 47.6 compared to the previous reading of 46.0.
• Australia’s Consumer Inflation Expectations for December eased at 4.5% against the previous figures of 4.9%.
• The People’s Bank of China (PBoC) released its Interest Rate Decision on Wednesday. The Monetary Policy Committee (MPC) kept the benchmark rate unchanged at 3.45%.
• New York Fed President John Williams opposed the speculation surrounding a potential rate cut in March.
• San Francisco Fed President Mary Daly called the predictions on policy stance premature.
• Austan Goolsbee, Chicago Fed President echoed a similar sentiment, cautioning that the market's optimism for interest rate cuts may have gone beyond realistic expectations.
• US Housing Starts rose to 1.56M, surpassing the market consensus of 1.36M. However, Building Permits declined to 1.46M, slightly below the forecast of 1.47M.

Technical Analysis: Australian Dollar maintains its position below 0.6750 major level

The Australian Dollar trades higher around 0.6740 on Thursday, slightly below the significant level at 0.6750. The prevailing bullish sentiment suggests a potential for the AUD/USD pair to revisit the recent peak at 0.6779 and aim for the key resistance at the psychological level of 0.6800. On the downside, support levels may be identified at the seven-day Exponential Moving Average (EMA) at 0.6707, followed by the psychological level at 0.6700. A breach below this crucial support region could lead the AUD/USD pair towards the 23.6% Fibonacci retracement at 0.6659 before reaching the major zone at 0.6650.

AUD/USD: Daily Chart