Australian Dollar rebounds from multi-year lows but upside remains limited

• AUD edges up to 0.6180 on Tuesday, off multi-year lows.
• Fed rate-hold expectations in January underpin the US Dollar.
• Soft Australian fundamentals, China slowdown cap Aussie recovery.

The Australian Dollar (AUD) rebounded from 0.6130, its lowest level since April 2020, to reach 0.6180 on Tuesday, buoyed by firm commodity prices and a slight improvement in market sentiment. Despite this partial comeback, the pair still remains vulnerable amid a dovish Reserve Bank of Australia (RBA) and an uncertain local economic outlook.

Daily digest market movers: Aussie sees some light after soft PPI data from the US

• The US Dollar Index (DXY) retreats after Monday's gains but keeps an overall firm tone, supported by the Fed's likely rate hold in January.
• Producer Price Index (PPI) data in the US rose 3.3% year-over-year for December, missing the 3.4% forecast; core PPI reached 3.5%, also below estimates.
• Following the data, US Treasury yields dropped, favouring the pair's upside, but the USD's outlook remains favourable.
• Consumer Price Index data on Wednesday will be key for the pair's trajectory.

AUD/USD technical outlook: Bulls eye 20-day SMA as pair hovers near oversold territory

The Relative Strength Index (RSI) stands at 42, rising sharply but still in negative territory, while the Moving Average Convergence Divergence (MACD) histogram prints flat red bars, indicating only modest relief for bulls. While the Aussie has managed to halt its latest losing streak, the pair remains near April 2020 lows. Any sustained recovery may require a clear break above the 20-day Simple Moving Average (SMA), which is currently acting as a barrier to further upside.