Australian Dollar moves little due to thin trading ahead of New Year holiday

• The Australian Dollar remains steady after the release of China's NBS Manufacturing Purchasing Managers' Index data on Tuesday.
• China's official Manufacturing PMI slipped to 50.1, with Non-Manufacturing PMI improving to 52.2 in December.
• The US Dollar struggled as Treasury bond yields depreciated by around 2% on Monday.

The Australian Dollar (AUD) remains tepid against the US Dollar (USD) following the release of mixed NBS Manufacturing Purchasing Managers' Index (PMI) data from China on Tuesday. As close trade partners, any fluctuations in China's economy tend to impact Australian markets.

China's official Manufacturing PMI slipped to 50.1 in December, down from 50.3 in the previous reading and below market expectations of 50.3. Meanwhile, the NBS Non-Manufacturing PMI improved significantly, rising to 52.2 in December from November's 50.0 and beating estimates of 50.2.

The recent RBA's Meeting Minutes suggested that the board had grown more confident about inflation since its previous meeting, though risks persisted. The board emphasized the need for monetary policy to remain "sufficiently restrictive" until there was greater certainty about inflation.

Australian Dollar remains subdued amid light trading on the final day of the year

• The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, remains subdued around 108.00 as traders continue to digest the US Federal Reserve's (Fed) hawkish pivot.
• The US Dollar faced challenges as US Treasury bond yields depreciated by around 2% on Monday. 2-year and 10-year yields stood at 4.24% and 4.53%, respectively.
• The Federal Reserve signaled a more cautious outlook for additional rate cuts in 2025, marking a shift in its monetary policy stance. This development highlights uncertainties surrounding future policy adjustments amid the anticipated economic strategies of the incoming Trump administration.
• The risk-sensitive Australian Dollar could face challenges due to the heightened geopolitical risks stemming from the prolonged Russia-Ukraine conflict and ongoing tensions in the Middle East.
• The RBA board also noted that if future data aligns with or falls below forecasts, it would bolster confidence in inflation and make it appropriate to start easing policy restrictions. However, stronger-than-expected data could require maintaining restrictive policies for a longer period.
• Reserve Bank of Australia Governor Michele Bullock highlighted the continued strength of the labor market as a key reason the RBA has been slower than other nations to commence its monetary easing cycle.
• Traders expressed concerns about President-elect Trump's economic policies, fearing that tariffs could drive up the cost of living. These concerns were compounded by the Federal Open Market Committee's (FOMC) recent projections, which indicated fewer rate cuts in 2025, reflecting caution amid persistent inflationary pressures.

Technical Analysis: Australian Dollar hovers below nine-day EMA near 0.6200

AUD/USD trades near 0.6220 on Tuesday, with the daily chart signaling a persistent bearish bias as the pair remains within a descending channel pattern. The 14-day Relative Strength Index (RSI) hovers slightly below the 30-level, suggesting the potential near-term upward correction to dissipate.

On the downside, the AUD/USD pair may navigate the region around the lower boundary of the descending channel near the 0.6060 support level.

The AUD/USD pair faces immediate resistance at the nine-day Exponential Moving Average (EMA) of 0.6243, followed by the 14-day EMA at 0.6271. A more significant hurdle is the descending channel's upper boundary, around 0.6330.

AUD/USD: Daily Chart