The Australian Dollar (AUD) continues to face challenges against the US Dollar (USD), struggling to find stability amidst various global factors. In the previous session, the AUD/USD pair experienced a decline, influenced by a stronger Greenback driven by upbeat US Treasury yields, reducing speculation on potential rate cuts from the US Federal Reserve (Fed). Heightened tensions in the Middle East conflict and a decline in commodity prices, signaling fears of weaker demand from China, have further contributed to the Australian Dollar’s struggles.
Australia’s recent Consumer Confidence contraction in January adds to the sentiment that the Reserve Bank of Australia (RBA) might not consider further policy tightening in its upcoming February board meeting, exerting additional pressure on the AUD/USD pair.
China’s economic indicators, including annual Gross Domestic Product (GDP) growth, Industrial Production, and Retail Sales, have presented a mixed picture. While China’s GDP slightly exceeded expectations, concerns arise from a third consecutive month of decline in consumer prices and a decrease in producer prices, indicating persistent deflationary cost pressures in the country. Premier Li Qiang’s speech at the World Economic Forum suggested a growth rate of approximately 5.2% in 2023, slightly better than Beijing’s official target.
The US Dollar Index (DXY) continues its winning streak, supported by cautious remarks from Federal Reserve officials, emphasizing a measured approach to outlining plans for rate cuts despite positive developments in the inflation outlook.
Technical analysis reveals the AUD/USD pair near 0.6590, with immediate psychological resistance at 0.6600. A break above this level could propel the pair towards 0.6650, followed by key levels at 0.6680 and 0.6700. On the downside, the 50% retracement level at 0.6566 serves as a crucial support, followed by a major support level at 0.6550.
Traders are likely to monitor US Retail Sales data for December for insights into consumer spending patterns, providing potential direction for the AUD/USD pair amidst the complex global economic landscape.