The Australian dollar is down for a fourth straight day and has posted sharp losses on Wednesday. In the North American session, AUD/USD is trading at 0.6719, down 0.62%.

The last week of the year was subdued as the data calendar was light. Still, the Australian dollar hit a six-month high on Christmas Day, rising to 0.6871. The Aussie gained 3.1% in December, but has run into some headwinds and is down 1.8% since December 28.

China releases the Caixin Services PMI for December on Thursday. The consensus stands at 51.6, almost unchanged from 51.5 in November. The service sector has expanded for 11 straight months but recent readings have shown very weak growth, as China continues to grapple with an economic slowdown. Australia counts China as its biggest trading partner and the Australian dollar is sensitive to Chinese economic releases.

There are no tier-1 events out of Australia this week but it’s a busy day in the US, with the ISM Manufacturing PMI and the FOMC minutes from the December meeting. The ISM Manufacturing PMI rose to 47.4 in December, above the consensus estimate of 47.1 and the November reading of 46.7. The manufacturing sector has been in a prolonged depression and hasn’t shown expansion since October 2022. Manufacturers have been squeezed by weak demand abroad and high borrowing costs, but if the Fed cuts rates, we could see the beleaguered manufacturing sector show some improvement.

FOMC meeting looms 

The Federal Reserve releases the FOMC minutes of the December meeting later today. The meeting was highly significant as the Fed surprised the markets by failing to push back against rate cut expectations. The Fed signalled that it expected to trim rates three times in 2024, a major pivot from the well-worn script of ‘higher for longer. Some Fed members have urged caution, saying that the markets have run ahead of themselves and rate cuts are not imminent. The markets are confident that the Fed will cut rates up to six times this year and have priced in the probability of a rate hike by March at above 80%, according to the CME’s FedWatch tool.

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AUD/USD Technical

• AUD/USD pushed below support at 0.6731 and is testing support at 0.6702. Below, there is support at 0.6647
• 0.6786 and 0.6815 are the next resistance lines

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