Australian Dollar declines after China’s RatingDog Services PMI

The Australian Dollar (AUD) holds losses against the US Dollar (USD) following the release of China’s RatingDog Services Purchasing Managers’ Index (PMI) on Monday, which declined to 52.0 in December from 52.1 in November. RatingDog reported last week that Manufacturing PMI climbed to 50.1 in December from 49.9 in November. It is important to note that any change in the Chinese economy could impact the AUD as China and Australia are close trading partners.

The AUD could gain support as expectations build for interest rate hikes by the Reserve Bank of Australia (RBA). Traders await Australia’s Q4 CPI report due on January 28, with analysts noting that a stronger-than-expected core inflation reading could prompt a rate hike at the RBA’s February 3 meeting. RBA Governor Michele Bullock said earlier that although the board did not explicitly consider a rate hike, it discussed the conditions under which interest rates might need to increase in 2026.

The AUD/USD pair depreciates as the US Dollar (USD) strengthens on safe-haven demand, driven by a renewed rise in geopolitical risks following the United States’ (US) capture of Venezuelan President Nicolas Maduro.

US Dollar rises amid US-Venezuelan tensions

• The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is gaining ground and trading around 98.60 at the time of writing. ISM Manufacturing PMI data will be eyed later in the day.
• CNN reported over the weekend that the US President Donald Trump administration launched a “large-scale strike against Venezuela” and detained President Maduro to face charges, without congressional approval. Trump said the US would administer Venezuela until a safe, orderly, and judicious transition is achieved.
• The Guardian reported on Monday that President Trump warned Washington could launch a new military intervention if Venezuela’s interim president, Delcy Rodríguez, fails to meet US demands. He also made remarks about Colombia’s leadership, floated the idea of “Operation Colombia,” criticized Mexico for not getting its act together, and suggested Cuba appeared close to collapse.
• Traders expect two additional Federal Reserve rate cuts in 2026. Markets are bracing for US President Donald Trump to nominate a new Fed chair to replace Jerome Powell when his term ends in May, a move that could tilt monetary policy toward lower interest rates.
• Federal Open Market Committee (FOMC) December Meeting Minutes suggested last week that most participants judged that it would likely be appropriate to stand on further rate cuts if inflation declined over time. Meanwhile, some Fed officials said it might be best to leave rates unchanged for a while after the committee made three rate reductions this year to support the weakening labor market.
• China’s official Manufacturing Purchasing Managers’ Index (PMI), which rose to 50.1 in December, compared to 49.2 in the previous reading. The reading came in above the market consensus of 49.2 in the reported month. The NBS Non-Manufacturing PMI climbed to 50.2 in December versus November’s 49.5 figure. The market forecast was for a 49.8 print.
• The RBA December Meeting Minutes indicated that policymakers stand ready to tighten policy if inflation fails to ease as expected, placing increased focus on the Q4 CPI report due January 28. Analysts note that a stronger-than-expected Q4 core inflation reading could trigger a rate hike at the RBA’s February 3 meeting.
• Australia’s headline inflation rose 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 pricing in a rate hike as early as February 2026, with both the Commonwealth Bank of Australia and National Australia Bank projecting a rise to 3.85% at the RBA’s first policy meeting of the year. Consumer Inflation Expectations rose to 4.7% in December from November’s three-month low of 4.5%.

Australian Dollar hovers around nine-day EMA

AUD/USD is trading around 0.6680 on Monday. The technical analysis of the daily chart indicates that the pair hovers around the lower boundary of the ascending channel pattern. Further directions would offer a clear directional bias. The 14-day Relative Strength Index (RSI) at 59.60 suggests bullish momentum, with room for further upside before overbought conditions emerge.

The AUD/USD pair is testing the immediate barrier at the nine-day EMA of 0.6681. A break above this level would support the pair to test the psychological level of 0.6700, followed by 0.6727, the highest level since October 2024, reached on December 29. Further gains could allow the pair to approach the upper boundary of the ascending channel near 0.6810.

On the downside, the AUD/USD pair tests the lower ascending channel boundary around 0.6680. A break below the channel could expose the AUD/USD pair to the area around the six-month low near 0.6414, recorded on August 21.