Australian Dollar rebounds from five-year lows due to strong commodity prices – FXStreet

• The Australian dollar has rebounded from US$0.6131, its lowest level since April 2020.
• The Australian dollar is supported by solid commodity prices, with improved market sentiment.
• The US dollar is being supported by an increasing probability that the Fed will keep interest rates unchanged in January.

The Australian dollar (AUD) rose for the second day in a row against the US dollar (USD) on Tuesday, rebounding from its lowest since April 2020 at 0.6131. AUD/USD rose as the Australian dollar benefited from strong commodity prices.

US President-elect Donald Trump's economic team believes the gradual increase in import tariffs has boosted investor confidence and supported risk-sensitive currencies such as the Australian dollar, contributing to the AUD/JPY appreciation. are.

The S&P/ASX 200 index also rose 0.2% on Tuesday to around 8,210, ending a three-day losing streak. Mining and energy stocks led the recovery, but Australian shares followed Wall Street's overnight gains as investors shifted their focus from big tech stocks to other sectors.

Traders analyzed data showing consumer confidence has fallen for the second month in a row. Australia's Westpac Consumer Confidence Index fell by 0.7% to 92.1 points in January 2025, highlighting the persistent pessimism among consumers.

The AUD/USD pair is facing downward pressure as markets price in a 75% chance of a rate cut by the Reserve Bank of Australia (RBA) next month. Investors are expected to closely monitor the Australian jobs report later this week for further clarity on the RBA's policy outlook.

The Australian dollar will also receive some support from China's recent economic stimulus, as any change in China's economic situation could have a significant impact on the Australian market, given Australia's close trade relationship with China. It turned out to be a material.

Aussie dollar could struggle due to hawkish sentiment over Fed policy outlook

• The US Dollar Index (DXY), which measures the US dollar's performance against six major currencies, is trading around 109.60, near its highest since November 2022. The US dollar strengthened following strong US labor market data in December, which is expected to provide support. The US Federal Reserve (Fed) decided in January to keep interest rates at current levels. Later on Tuesday, all eyes will be on the US producer price index (PPI) for December.
• The rise in U.S. bond yields accelerated following U.S. labor market data, with the two-year bond yield reaching 4.42% and the 10-year bond yield reaching 4.80% as of Monday.
• Nonfarm payrolls (NFP) increased by 256,000 in December, significantly higher than market expectations of 160,000, and compared to November, according to U.S. Bureau of Labor Statistics (BLS) data released Friday. This exceeded the revised figure of 212,000 (previously reported at 227,000).
• Last week, Fed Board member Michel – Mr. Bowman also added his voice to the chorus of Fed speakers.
• Kansas Fed President Jeffrey Schmidt made headlines Thursday when he said most of the goals mandated by the Federal Reserve had recently been met. Governor Schmidt emphasized the need to shrink the Fed's balance sheet and suggested that interest rate policy is moving closer to long-term equilibrium. He pointed out that future rate cuts should be gradual and based on economic indicators.
• The China Foreign Exchange Commission (CFXC) on Monday pledged to support the Chinese yuan at a meeting held in Beijing on Monday under the guidance of the People's Bank of China (People's Bank of China). Separately, the People's Bank of China and the State Administration of Foreign Exchange (SAFE), China's exchange regulator, announced that the macroprudential adjustment parameter for cross-border lending will be raised from 1.5 to 1.75 from January 13, 2025.
• The TD-MI inflation gauge rose 0.6% month-over-month in December, significantly accelerating from November's 0.2% rise and reaching its highest level since December 2023. On an annual basis, the inflation gauge rose 2.6% and fell. From the previous increase of 2.9%.
• “Interest rate and reserve requirement ratio (RRR) tools will be utilized to maintain sufficient liquidity,” People's Bank of China (Central Bank) Governor Ban Gongsheng said on Monday. Kousei reaffirmed China's plans to widen its budget deficit and stressed that China will remain the driving force behind the global economy.

Technical analysis: Australian dollar rises to 9-day EMA near 0.6200

The AUD/USD pair was trading around 0.6190 on Tuesday and remains within a descending channel on the daily chart, maintaining a bearish outlook. The 14-day Relative Strength Index (RSI) has crossed the 30 level, indicating a recovery from an oversold situation.

The pair faces immediate resistance at the 9-day exponential moving average (EMA) at 0.6193, followed by the 14-day EMA at 0.6210. The more important resistance level is near the top of the descending channel, at approximately 0.6230.

On the downside, the AUD/USD pair is likely to test support at the lower end of the descending channel, near the 0.5940 level.

AUD/USD: daily chart