AUD/USD extends its rally beyond 0.6800 awaiting US PCE data

The Australian Dollar’s bullish momentum remains firm, as the pair has crossed beyond the 0.6800 level favoured by a broad-based Dollar weakness, with all eyes on the US PCE Prices Index, due later today.

The Aussie, buoyed by RBA - Fed divergence

The Aussie is on track to a nearly 2% weekly rally, following a similar performance last week. The hawkish RBA minutes released earlier this week, have highlighted the divergence with a dovish Federal Reserve, giving a fresh impulse to the pair.

In the US, data released on Thursday revealed that the economy grew slower than initially thought in the third quarter. US Q3 GDP was revised down to a 4.9% yearly growth from the previous estimation of 5.2% with manufacturing and inflation data adding to evidence of a slower momentum.

In this scenario, investors are awaiting the US CPI data to confirm their views on the Fed rate outlook. Futures markets are pricing nearly 75% chances that the easing cycle will start in March and that the US central bank will slash rates by 150 bps over the next year.

AUD seen as one of the best performers in 2024 – ING

Looking ahead, the ING Technical analysis team expects the Aussie to outperform most of its rivals next year: “Currencies prepared to challenge the Dollar are going to need some help. And both the AUD and NOK are packing undervaluation in their armoury (...) These are the currencies most undervalued according to our medium-term fair value model, where divergence from better export prices is the core story.”

Technical levels to watch