Australian dollar rises while the US dollar falls to near-month lows.

On Friday, the Australian Dollar (AUD) traded marginally below its recent peak of 0.6802. A level not seen in nearly five months. The first jump in the Australian Dollar was ascribed to increased market risk appetite along with a fall of the US Dollar (USD). Furthermore, hawkish sentiment surrounding the Reserve Bank of Australia (RBA) maintains the Australian Dollar strong. Australia’s high inflation and stable property prices may influence the Reserve Bank of Australia (RBA) to maintain its hawkish posture. If the global economy gets traction, particularly with potential Chinese economic stimulus. The RBA may continue to boost interest rates. The current RBA estimates hitting the upper limit of the 2-3% inflation projection by the end of 2025. Implying that the RBA may still have some wiggle room.

Australian central bank will consider new data before deciding on future monetary policy.

In its last Meeting Minutes, the Reserve Bank of Australia (RBA) underscored the need of thoroughly evaluating. Additional evidence to assess the balance of risks before deciding on future interest rates. The World Interest Rate Probability Tool (WIRP) displays a widespread belief that the RBA will raise interest rates. In the forthcoming February policy meeting, the Fed is expected to refrain from cutting interest rates.

Softer US data adds to belief that the Fed may ease monetary policy in early 2024.

The US Dollar Index (DXY) is under pressure as anticipation about probable easing by the US Federal Reserve (Fed) grows. These heightened expectations are the result of the Fed’s recent dovish attitude in its most recent meeting. Despite the rising conjecture, Fed officials have cautioned against jumping to conclusions, instead calling for a cautious approach.

Annualized US GDP and Core PCE QoQ fell 4.9% and 2.0%, respectively.

Treasury bond yields in the United States (US) initially fell but recovered in the previous session. The 2-year and 10-year rates are currently 4.34% and 3.88%, respectively, weighing on the USD’s appeal. Furthermore, the variation in US economic data on Thursday may have put additional pressure on the Greenback.

The US Bureau  According to the Bureau of Economic Analysis (BEA), GDP Annualized (Q3) expanded at a rate of 4.9%, somewhat lower than the projected consistency of 5.2%. Furthermore, Core Personal Consumption Expenditures (QoQ) fell to 2.0% from 2.3% previously. Initial Jobless Claims for the week ending December 15 were 205K, above the predicted 215K but remaining close to the prior total of 203K. A series of data releases, including Core Personal Consumption Expenditures – Price Index data and the Michigan Consumer Sentiment Index, will be scrutinized on Friday.

Australian dollar Technical Outlook

The Australian dollar is trading below 0.6800, which corresponds to a five-month high.

On Friday, the Australian Dollar trades below psychological barrier around 0.6800 and a five-month high at 0.6802. The prevalent Bullish attitude predicts that the AUDUSD pair could surpass the recent high and target the critical resistance level of 0.6850. On the downside, the significant level at 0.6750 would be indicated as support, followed by the seven-day Exponential Moving Average (EMA) at 0.6740. If the AUDUSD pair breaks below this critical support level, it will move towards psychological support around 0.6700, followed by the 23.6% Fibonacci retracement at 0.6679.