The Australian dollar stabilized near 0.6370 during Monday’s Asian session, pausing its four-day decline as traders weighed mixed Chinese economic data and subdued US dollar performance ahead of the Federal Reserve’s interest rate decision this week. A modest recovery in risk appetite helped lift the currency after hitting yearly lows last week.
China’s November industrial production rose 5.4% year-on-year, slightly above expectations, while retail sales growth slowed to 3.0%, missing the projected 4.6%. These figures underscore ongoing challenges in China’s domestic consumption, though Beijing’s commitment to expanding fiscal policy in 2024 has raised hopes for a potential recovery. As China is Australia’s largest trading partner, its economic outlook remains pivotal to the Aussie’s performance.
The US dollar stayed on the back foot as investors largely expect the Federal Reserve to deliver a 25-basis-point rate cut on Wednesday, its first reduction this year. However, markets remain cautious, with Fed Chair Jerome Powell’s updated economic forecasts expected to set the tone for 2024. Softer US Treasury yields added to the pressure on the greenback, providing a mild reprieve for risk-sensitive currencies like the AUD.
Despite Monday’s recovery, the Australian dollar faces strong resistance near the 0.6396 level, aligned with the nine-day Exponential Moving Average (EMA). On the downside, immediate support lies at the yearly low of 0.6348, with a breach potentially opening the door to a further decline toward 0.6180. For now, investors remain focused on developments in China and the Fed meeting to guide the AUD’s next move.
