Australian Dollar falls ahead of Fed

• Aussie drops near 0.6340 as sentiment sours before Fed decision.
• Fed expected to slow the pace of 2025 rate cuts.
• Weak Australian consumer sentiment fuels RBA dovish bets.
• Despite USD softness, AUD struggles amid cautious markets.

The Australian Dollar falls sharply to near 0.6340 amid a cautious market mood ahead of the Federal Reserve's policy announcement. The Fed is anticipated to hint at fewer interest rate cuts for 2025, weighing on risk appetite. Soft Australian consumer sentiment has bolstered expectations of a dovish Reserve Bank of Australia move in February, keeping the Aussie under pressure despite some recent USD weakness.

Daily digest market movers: Aussie slips as markets eye Fed pivot and soft Australian sentiment

• According to the CME FedWatch tool, traders price in a 25 basis points rate cut on Wednesday, but lean toward a pause in January 2025.
• The US Dollar Index (DXY) rises above 107.00 as risk-off mood prevails; S&P500 futures trade lower, signaling cautious sentiment.
• November's US Retail Sales growth of 0.7% beat forecasts, but mixed revisions and weaker ex-Cars data tempered USD optimism.
• Industrial Production contracted by 0.1% in November, missing the 0.3% expansion consensus, underscoring uneven US growth.
• US 10-year Treasury yields pull back from 4.43%, last seen near 4.38%, reflecting lingering uncertainty before the Fed's decision.
• Australian Westpac Consumer Confidence fell 2% in December after a 5.3% rise in November, raising doubts over the domestic outlook.
• Concerns over China's growth, due to incoming US tariffs, further weigh on the Aussie as Australia is a key Chinese trading partner.

AUD/USD technical outlook: Aussie nears oversold territory as bearish momentum builds

The AUD/USD pair declined by 0.42% to 0.6350 on Tuesday, extending its losing streak. The Relative Strength Index (RSI) hovers around oversold levels and is declining sharply. The Moving Average Convergence Divergence (MACD) histogram prints decreasing red bars, reinforcing the bearish narrative. While the pair struggles to hold ground, indicators flirting with oversold conditions may eventually trigger a corrective rebound. However, traders await the Fed's guidance and fresh economic data before placing directional bets.