• Australian Dollar sustains a bullish sentiment on the dovish outlook from the Fed.
• Australia's recent data reveals the economy's resilience, as highlighted by the figures released last week.
• Australian Trade Minister Don Farrell conveyed confidence that China will eliminate punitive tariffs on Australian wine.
• PBoC is scheduled to announce its Interest Rate Decision on Wednesday.
• Fed members' comments on interest rate cut weigh on US Dollar.

The Australian Dollar (AUD) seems to continue its winning streak that began on Wednesday. The AUD/USD pair received upward support in anticipation of rate cuts by the Federal Reserve (Fed), which weighs on the US Dollar (USD).

Australia's economy showcases resilience, buoyed by strong employment outcomes and increasing incomes, as data released last week indicates. Additionally, the enhanced Purchasing Managers Index (PMI) data for December has bolstered the Australian Dollar.

Traders are expected to observe the Meeting Minutes from the Reserve Bank of Australia (RBA) set to be released on Tuesday, alongside Building Permits and Housing Starts data from Australia. Furthermore, on Wednesday, the People's Bank of China (PBoC) is scheduled to announce its Interest Rate Decision, adding to the key events influencing the Aussie Dollar.

Australian Trade Minister Don Farrell expressed confidence on Sky News TV that China will remove punitive tariffs on Australian wine. Notably, China has already lifted trade restrictions on the majority of Australian exports that had been previously imposed, indicating a gradual improvement in relations between the two countries.

The US Dollar Index (DXY) grapples to maintain its position after rebounding from a four-month low at 101.77 marked on Thursday. The DXY received support from the improved short-term yield on the US Treasury bond. The 2-year US bond yield improved to 4.48% on Friday.

Additionally, the moderate preliminary Purchasing Managers Index (PMI) for December contributed support for the USD. S&P Global Services PMI rose to 51.3 from 50.8 prior. While Manufacturing PMI declined to 48.2 from 49.4. Investors will focus on Consumer Confidence and Existing Home Sales Change on Wednesday.

However, the Greenback encounters challenges stemming from a weakened sentiment, primarily influenced by the Federal Open Market Committee's (FOMC) dovish statement. Additionally, dovish remarks from various Fed members exert pressure on the Greenback.

Atlanta Fed President Raphael Bostic, on Friday, anticipated a potential interest rate cut in the third quarter of 2024 if inflation follows the expected trajectory. Furthermore, Chicago Fed President Austan Goolsbee did not rule out the possibility of a rate cut at the Fed's meeting next March.

Daily Digest Market Movers: Australian Dollar seems hawkish as economy shows resilience

• The preliminary Judo Bank Composite PMI improved to 47.4 from the previous reading 46.2. The Manufacturing PMI for the same period registered 47.8, a slight increase from the prior figure of 47.7. Additionally, 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 seasonally adjusted Aussie Employment Change (Nov) improved substantially to 61.5K compared to the expected 11.0K. Unemployment Rate rose to 3.9% from 3.7% previously.
• The People's Bank of China (PBoC) kept its 1-year Medium-term Lending Facility (MLF) rate unchanged at 2.5%. Additionally, PBoC injected 1.45 trillion Yuan to bolster bank liquidity as 650 billion Yuan worth of MLF loans were matured.
• The National Bureau of Statistics of China revealed that Industrial Production (YoY) improved to 6.6% in November from 4.6% prior, exceeding the market expectation of 5.6%. However, China Retail Sales (YoY) rose to 10.1% from 7.6% prior, falling short of the market consensus of a 12.5% rise.
• Federal Reserve (Fed) maintained interest rates at 5.5% in its December policy meeting as expected. Markets are now projecting three rate cuts for 2024.
• US Retail Sales (MoM) rose 0.3% in November, compared to the expected decline of 0.1%. Initial Jobless Claims for the week ending on December 8 came in at 202K against the 220K expected.

Technical Analysis: Australian Dollar hovers around the 0.6700 post testing recent high

The Australian Dollar hovers around 0.6700 on Monday, having recently tested a five-month high at 0.6728 on Friday. A prevailing bullish sentiment could propel the AUD/USD pair to surpass the recent high and approach the pivotal barrier at 0.6750. On the downside, noteworthy support lies at 0.6650, followed by the 23.6% Fibonacci retracement at 0.6619, and subsequently reaching the psychological support at 0.6600, aligned with the 21-day Exponential Moving Average (EMA) at 0.6597.

AUD/USD: Daily Chart