• Australian Dollar posts fresh five-month high on subdued Greenback.
• Australian central bank could be hawkish in early 2024 as inflation remains solid.
• China's Jan-Nov Industrial Profits (YoY) declined by 4.4%.
• US Dollar faces challenges on speculation of the Fed going softer in the upcoming year.

The Australian Dollar (AUD) moves sideways on Wednesday amid US Dollar (USD) shows signs of weakness, influenced by the speculation on a dovish stance of the Federal Reserve (Fed) on interest rates. The AUD/USD pair trades below its recent high of 0.6829, a mark untouched for nearly five months.

Australia’s central bank reflects a hawkish outlook, driven by robust inflation and stable housing prices, contributing to the resilience of the Australian Dollar. The upcoming year might witness a tug-of-war between expectations of rate cuts and the Reserve Bank of Australia's (RBA) resistance. With the latest RBA forecasts approaching the upper boundary of the 2-3% inflation target by the close of 2025, the RBA may still be open to additional deliberation.

China's year-on-year Industrial Profits for January to November registered a decline of 4.4%, indicating a slowdown and highlighting the need for additional policy support from Beijing to bolster growth in the world's second-largest economy. China takes center stage in shaping the global economic landscape in 2024, marked by stable inflation and low borrowing costs. The world is keenly observing as the global economy gains traction, particularly with the prospect of economic stimulus from China. Such developments could sway the Reserve Bank of Australia (RBA) to maintain its hawkish stance, guided by trade relations between the two countries.

The US Dollar Index (DXY) is encountering downward pressure amid growing speculations of potential easing by the US Federal Reserve (Fed). This sentiment is further exacerbated by the decline in US Treasury yields, adding to the factors undermining the strength of the Greenback.

Former Dallas Federal Reserve President Robert Kaplan shared his insights with the media on Tuesday. Kaplan emphasized the Federal Reserve's previous error of maintaining excessive accommodation for an extended period, even as the economy showed signs of improvement. He believed that the central bank is cautious not to repeat the same mistake on the opposite end, avoiding a scenario where it becomes overly restrictive.

Daily Digest Market Movers: Australian Dollar rises on hawkish RBA, weaker Greenback

• RBA Private Sector Credit (MoM) demonstrated a 0.4% increase in November, surpassing the previous rise of 0.3%. However, the Year-over-Year data indicated a decrease of 4.7%, compared to the previous 4.8% rise.
• RBA highlighted the examination of additional data to assess the balance of risks before deciding on future interest rates in its recent Meeting Minutes.
• US Housing Price Index (MoM) contracted to 0.3% from 0.7% prior, falling short of 0.5% expectations in October.
• US Bureau of Economic Analysis (BEA) reveals that the Core Personal Consumption Expenditures - Price Index (YoY) grew at 3.2% in November, falling short of the 3.3% expectations and 3.4% prior. While the MoM data showed consistency at 0.1% against the market expectation of 0.2%.
• US Gross Domestic Product Annualized grew at a rate of 4.9% in Q3, slightly below the expected consistency of 5.2%.

Technical Analysis: Australian Dollar trades near 0.6820 below a five-month high

The Australian Dollar hovers around 0.6820, slightly below its five-month high of 0.6829 on Monday. The prevailing bullish sentiment suggests a potential for the AUD/USD pair to approach the key resistance at the major level of 0.6850. On the downside, support levels are identifiable at the psychological level of 0.6800, followed by the seven-day Exponential Moving Average (EMA) at 0.6785. A breach below this crucial support zone could lead the AUD/USD pair towards the psychological support at 0.6700 before encountering the 23.6% Fibonacci retracement at 0.6693