Ella 
AUD/USD has started the new week/month on a softer note, slipping back below the psychological 0.6500 mark during the Asian session, snapping a three-game winning streak. In addition, the fundamental backdrop supports the Australian dollar resuming its decline over the past two months.
Concerns about a second wave of the U.S.-China trade war after President-elect Donald Trump takes office in January drove some safe-haven flows into the U.S. dollar (USD) and weakened China’s proxy currency, the Australian dollar (AUD). In fact, Trump has promised to impose huge tariffs on America’s three largest trading partners – Mexico, Canada and China. In addition, Trump has threatened to impose 100% tariffs on the so-called “BRICS” countries – Brazil, Russia, India, China and South Africa – if they replace the dollar with other currencies in international transactions.
Meanwhile, growing belief that Trump’s tariff plans could drive up consumer prices and limit further easing of monetary policy by the Federal Reserve has triggered new highs in U.S. Treasury yields. In addition, ongoing geopolitical risks arising from the protracted Russia-Ukraine war have also helped the safe-haven dollar recover from the nearly three-week low hit on Friday. This overshadowed the hawkish stance of the Reserve Bank of Australia (RBA) and provided little support for the Australian dollar.
Data released over the weekend showed that China’s official manufacturing purchasing managers’ index (PMI) rose to 50.3 from 50.2 in November, while the National Bureau of Statistics’ non-manufacturing purchasing managers’ index (PMI) fell to 50.0 from 50.2 in October. In addition, investors still hope that the government will introduce more stimulus policies to boost domestic demand. However, this failed to boost the bulls or bring any respite to AUD/USD.
The above fundamental background suggests that there is minimal downside resistance for Australian dollar spot prices, although as the new week begins, traders may avoid making aggressive bets ahead of key U.S. macro data. The U.S. economic calendar is busy this week. The first release is the ISM Manufacturing PMI, which may affect the trend of the U.S. dollar and allow traders to seize short-term opportunities. However, the focus remains on the closely watched U.S. employment data, Friday’s non-farm payrolls (NFP) report.
You Might Be Interested In:
