Australian Dollar continues to show weakness after the release of China’s RatingDog Services PMI

Australian Dollar Weakens After Chinese Economic Data

The Australian Dollar (AUD) continues to decline against the US Dollar (USD) after China’s RatingDog Services Purchasing Managers’ Index (PMI) slipped to 52.0 in December, down from 52.1 in November. Last week, RatingDog noted that the Manufacturing PMI improved slightly to 50.1 in December from 49.9 the previous month. Given the close trade relationship between Australia and China, shifts in China’s economic performance often influence the AUD.

There is potential for the AUD to find support as speculation grows over possible interest rate increases by the Reserve Bank of Australia (RBA). Investors are watching for Australia’s fourth-quarter CPI data, set for release on January 28. Analysts suggest that if core inflation exceeds expectations, the RBA might consider a rate hike at its meeting on February 3. RBA Governor Michele Bullock previously mentioned that while a rate hike was not directly discussed, the board reviewed scenarios that could require higher interest rates in 2026.

The AUD/USD pair is under pressure as the US Dollar strengthens, driven by safe-haven flows amid heightened geopolitical tensions following the US capture of Venezuelan President Nicolas Maduro.

US Dollar Gains Amid Heightened US-Venezuela Tensions

• The US Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, is advancing and trades near 98.60 at the time of writing. Later today, attention will turn to the ISM Manufacturing PMI release.
• According to CNN, the Trump administration initiated a significant military operation in Venezuela over the weekend, detaining President Maduro to face charges without congressional approval. President Trump stated that the US would oversee Venezuela until a stable and lawful transition is achieved.
• The Guardian reported that President Trump warned of possible further military action if Venezuela’s interim leader, Delcy Rodríguez, does not comply with US demands. He also commented on Colombia’s government, floated the idea of “Operation Colombia,” criticized Mexico’s response, and suggested that Cuba is nearing collapse.
• Market participants anticipate two more Federal Reserve rate cuts in 2026. There is also speculation that President Trump may nominate a new Fed chair to succeed Jerome Powell when his term concludes in May, potentially steering monetary policy toward lower rates.
• The Federal Open Market Committee (FOMC) minutes from December indicated that most members believe further rate reductions would be appropriate if inflation continues to fall. Some officials, however, advocated for maintaining current rates after three cuts this year to support the softening labor market.
• China’s official Manufacturing PMI climbed to 50.1 in December, up from 49.2 previously and surpassing market expectations of 49.2. The NBS Non-Manufacturing PMI also rose to 50.2 in December from 49.5 in November, beating the forecast of 49.8.
• The RBA’s December meeting minutes revealed that policymakers are prepared to tighten monetary policy if inflation does not moderate as anticipated, putting greater emphasis on the upcoming Q4 CPI report. A stronger-than-expected inflation reading could prompt a rate hike at the RBA’s February 3 meeting.
• Australia’s headline inflation increased to 3.8% in October 2025 from 3.6% in September, remaining above the RBA’s 2–3% target range. As a result, markets are increasingly expecting a rate hike as soon as February 2026, with both Commonwealth Bank of Australia and National Australia Bank forecasting a rise to 3.85% at the RBA’s first meeting of the year. Consumer Inflation Expectations also climbed to 4.7% in December from 4.5% in November.

Australian Dollar Trades Near Key Technical Levels

On Monday, the AUD/USD pair is hovering around 0.6680. Technical analysis of the daily chart shows the pair trading near the lower edge of an upward channel. A decisive move in either direction could clarify the next trend. The 14-day Relative Strength Index (RSI) stands at 59.60, indicating bullish momentum with further room before reaching overbought territory.

The pair is currently challenging resistance at the nine-day Exponential Moving Average (EMA) of 0.6681. A successful break above this level could pave the way for a test of the psychological 0.6700 mark, followed by 0.6727—the highest level since October 2024, last seen on December 29. Continued strength may see the pair approach the upper boundary of the ascending channel near 0.6810.

Conversely, if the pair falls below the lower boundary of the ascending channel around 0.6680, it could open the door for a decline toward the six-month low near 0.6414, which was recorded on August 21. For more details, see the AUD/USD currency page.