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- China Optimism Fails to Lift AUD/USD, Stays Below 0.6300
China Optimism Fails to Lift AUD/USD, Stays Below 0.6300
Here's what you should know for Thursday, January 23
AtoZ Markets
January 23, 2025
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The US Dollar (USD) found its footing on Wednesday, bouncing back from multi-week lows. Meanwhile, the Australian Dollar (AUD) managed to hold steady just below the 0.6300 mark—a level that’s proving to be a tough nut to crack.
So, what’s driving the Aussie’s rebound?
After weeks of struggling under the weight of a strong Greenback, the AUD got a breather as the USD eased earlier this week. The so-called “Trump trade” narrative had propped up the Dollar since October, leaving risk-sensitive currencies like the Aussie in the dust. But now, with some USD weakness creeping in, the Aussie has found an opening to recover.
AUD/USD CHART
The Roadblocks Ahead
The Aussie’s path is littered with hurdles. Domestically, economic momentum is slowing, consumer and business confidence are shaky, and concerns about China’s sluggish recovery linger. As Australia’s largest trading partner, China’s economic health is crucial for the AUD.
On the commodities front, subdued copper prices and steady iron ore markets are offering some support, but they’re far from giving the currency a significant boost.
A Silver Lining
Australia’s job market delivered a pleasant surprise in December, adding 56.3K jobs, even as the unemployment rate ticked up slightly to 4.0%. Inflation expectations also cooled in January, dropping to 4.0% from 4.2%, hinting at easing price pressures.
At its December meeting, the RBA decided to hold rates steady at 4.35%, signaling a cautious “wait-and-see” stance. Governor Michele Bullock has made it clear that future decisions will hinge on upcoming economic data.
Looking Ahead
For the AUD/USD pair, challenges remain. A resilient US Dollar, mixed domestic data, and China’s recovery uncertainties could keep the Aussie under pressure. However, if the Federal Reserve hints at further rate cuts, a weaker USD might give the AUD a much-needed lift.
Key Australian data is just around the corner, with the NAB Business Confidence Index and quarterly inflation figures set to release next week. Technically, the AUD/USD faces critical support at 0.6130, with resistance sitting at 0.6301 and beyond.