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22 Dec 2023

AUD/USD loses momentum after hitting five-month highs above 0.6800

  • US consumer inflation declined more than expected in November.
  • US Dollar Index slides to its lowest level since July 27.
  • The AUD/USD holds firm, maintaining important weekly gains.

During the American session, the AUD/USD pair rose to 0.6824, reaching its highest intraday level since July, driven by broad-based Dollar weakness. It is holding onto its weekly gains, remaining near 0.6800.

Mixed US data: inflation approaches Fed's target

The latest important US economic report for 2023 showed that the Core Personal Consumption Expenditure Price Index (Core PCE) rose 0.1% in November, below the market consensus of 0.2%. The headline PCE declined for the first time since 2020. Another report indicated a 5.5% increase in Durable Goods Orders in November, and the University of Michigan Consumer Sentiment Index rose in December to 69.7 from 69.4.

The market reaction to the US data was limited. The numbers continue to indicate a robust economy and inflation approaching the Federal Reserve's target. Following the data, easing expectations rose, while US Treasury yields remained relatively steady.

The US Dollar index (DXY) dropped to 101.42, the lowest level since July, boosting the AUD/USD to approach 0.6825. The Australian Dollar is holding above 0.6800, set for its second consecutive weekly gain, reaffirming the bullish outlook. However, risks remain as the US economic performance could lead to the Fed cutting interest rates after other central banks, including the Reserve Bank of Australia (RBA).

Technical outlook 

The AUD/USD remains within an ascending channel on the daily chart; however, it is nearing the upper limit, which could potentially limit the rally and prompt a period of consolidation. Conversely, a breakout above the upper limit at 0.6830 could trigger acceleration, targeting 0.6850.

In the event of a downward correction, initial support may be found around the 0.6770 area, followed by 0.6725. If it falls below 0.6600, the outlook would shift from bullish to neutral/bearish.

AUD/USD daily chart 

 

Dec 22, 2023

Mexican Peso touches multi-month high in pre-holiday rally

The Mexican Peso (MXN) rallied to a fresh 15-week high on Friday as the broader market took one last opportunity to sell off the US Dollar (USD) heading into the extended holiday weekend.
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Dec 22, 2023

USD to be strong in 2024 – HSBC

Economists at HSBC retain a USD bullish view for 2024. USD likely to be on the defensive in the near term The USD is likely to be on the defensive in the near term, but we think the headwinds from yield differentials to the USD may not be large, as the Fed will likely be easing alongside other central banks (no matter from the market’s or our economists’ expectations).
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