Australian Dollar struggles under pressure as Fed policy shifts

• The Australian Dollar edges to 0.6392 but fails to hold gains.
• Markets anticipate that the Fed will deliver a hawkish cut.
• Higher US Treasury yields give the USD traction.

The Australian Dollar exhibits a subdued performance in Friday's session, pressured by a strengthening US Dollar (USD). Markets anticipate the Federal Reserve (Fed) will shift toward a more hawkish stance after Wednesday's interest rate cut. Despite robust Australian employment data briefly boosting the Aussie, the currency struggles to maintain upward momentum.

Daily digest market movers: Aussie gains clipped by mixed US data and Fed policy shift

• On Thursday, the US Bureau of Labor Statistics reported Initial Jobless Claims at 242K, above 220K forecasts, suggesting a softening labor market .
• November's Producer Price Index (PPI) rose 3% YoY with core PPI at 3.4%, both exceeding expectations and indicating persistent inflation.
• Mixed US data initially fueled speculation of further Fed easing, but the US Dollar Index stayed near 106.79.
• Australian employment data surpassed estimates, adding 35.6K jobs and lowering unemployment to 3.9%, prompting traders to reassess Reserve Bank of Australia policy.
• Odds for a February RBA rate cut fell from 70% to 50%, though the bank maintains a dovish stance, confident inflation is trending toward target.
• Fed Chair Jerome Powell's comments about a resilient US economy dampened hopes for a "Goldilocks" year-end scenario.
• Also, the sticky PPI figures are making markets expect the Fed to turn somewhat  hawkish in next week's meeting.

AUD/USD technical outlook: Aussie nears oversold conditions amid persistent downward pressure

The Relative Strength Index (RSI) hovers at 34, indicating near oversold conditions and mild downward momentum. Meanwhile, the Moving Average Convergene Divervence  (MACD) histogram shows decreasing green bars, reinforcing the bearish outlook. Should these oversold signals deepen, a corrective upward move may materialize.