Insights 
VT 
Key Points:
- Australian Dollar weakens as China’s December CPI rises 0.8% year-on-year, below the 0.9% forecast.
- Australia’s mixed November inflation leaves RBA policy uncertain, with focus turning to the quarterly CPI later this month.
The Australian Dollar (AUD) slips against the US Dollar (USD) on Friday. The AUD/USD pair stays under pressure following the release of key economic data from China, Australia’s major trading partner.
China’s Consumer Price Index (CPI) rose 0.8% year-on-year (YoY) in December, up from 0.7% in November but below the 0.9% forecast. On a monthly basis, CPI increased by 0.2%, reversing November’s 0.1% decline. Meanwhile, China’s Producer Price Index (PPI) fell 1.9% YoY in December, improving from the previous 2.2% drop and slightly outperforming expectations of a 2.0% decline.
Australia’s mixed November Consumer Price Index (CPI) left the Reserve Bank of Australia’s (RBA) policy outlook uncertain. Attention now turns to the quarterly CPI report due later this month for clearer guidance on the RBA’s next policy move. However, RBA Deputy Governor Andrew Hauser said on Thursday that the November inflation data was largely in line with expectations, adding that interest rate cuts are unlikely in the near term.
Technical Analysis
AUD/USD is trading around 0.6690 on Friday. Technical analysis of the 4-hour chart shows the pair testing the lower boundary of the ascending channel, indicating a potential erosion of its bullish bias. The current price remains below the moving averages, suggesting sellers are keen to push it lower. The next support level is around 0.6670.
The MACD signal line is beginning to cross below the 50 level, and if both lines complete the crossover, there is a high probability of further downside. The MACD histogram has also started showing bearish bars, suggesting that bearish momentum is starting to build.
Cautious Outlook as NFP Data Awaits
Traders remain cautious ahead of the US Nonfarm Payrolls (NFP) report, expected to provide further insight into labour market conditions and the Federal Reserve’s (Fed) policy outlook. December NFP is forecast to show job gains of 60,000, down from 64,000 in November.
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