The AUD/USD pair holds the bounce above 0.6350 during the Asian session on Monday, following mixed Chinese data releases. The pair remains underpinned by a US Dollar weakness which failed to gain traction despite strong S&P PMI data. Traders are gearing themselves to Wednesday’s Federal Reserve (Fed)
Fundamental overview
On the US side, the S&P Global Composite PMI for December’s flash estimate rose to 56.6 from 54.9 in November, indicating that US private sector business activity expanded at an accelerating pace. The Services PMI improved to 58.5 from 56.1, while the Manufacturing PMI declined to 48.3 from 49.7, signaling contraction in the manufacturing sector. Meanwhile, the Producer Price Index (PPI) for November showed higher-than-expected inflation, with headline PPI increasing by 3% YoY, up from 2.4%, and Core PPI rising to 3.4% YoY, exceeding projections.
On the Australian front, November's employment data crushed estimates, adding 35.6K jobs compared to the forecasted 25K, and the unemployment rate dipped to 3.9%, better than the predicted 4.2%. While this data led to a reassessment of monetary policy expectations—with market odds for a February rate cut dropping from 70% to 50%—the Reserve Bank of Australia (RBA) maintained a dovish stance, emphasizing its confidence in inflation moving sustainably toward target.
Technical overview
The Relative Strength Index (RSI) is at 34, indicating near oversold conditions and currently flat. The MACD histogram shows decreasing green bars, signaling weakening bullish momentum.
Despite the bearish sentiment, oversold conditions could trigger an upward corrective move. Immediate support is seen near 0.6330, with a break below this level potentially leading to further downside. Resistance remains strong at 0.6380, with a sustained move above this level required to challenge the psychological 0.6400 mark and pave the way for a retest of 0.6430.
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