AUD/USD keeps the red near two-week low, around 0.6535-30 area after Chinese trade data

• AUD/USD remains under some selling pressure for the fourth successive day on Thursday.
• China’s economic woes and RBA rate cut bets weigh on the Aussie amid the recent USD rally.
• Dovish Fed expectations might cap any further USD gains and lend some support to the pair.

The AUD/USD pair turns lower for the fourth straight day following an early uptick to the 0.6555-0.6560 area and drops to over a two-week low during the Asian session on Thursday. Spot prices remain depressed near the 0.6530 region and move little in reaction to the mixed Chinese trade data.

The Customs General Administration of China (CGAC) reported that the trade surplus jumped to $68.39 billion in November from the $56.53 billion previous. Additional details of the report indicated that exports unexpectedly climbed by 0.5% during the reported month. That said, imports missed consensus estimates by a big margin and registered a 0.6% drop in November, fueling concerns about weak domestic demand. This comes on top of Moody's cut to China's credit outlook, state-owned firms and banks, which further tempers investors' appetite for riskier assets.

This, along with the rather unimpressive Australian trade data and rising bets for a rate cut by the Reserve Bank of Australia (RBA) in around August/September 2024, undermines the China-proxy Australian Dollar (AUD). Meanwhile, a weaker risk tone assists the safe-haven US Dollar (USD) to preserve its recent strong gains to a two-week top touched on Wednesday, which contributes to the offered tone surrounding the AUD/USD pair. That said, dovish Federal Reserve (Fed) expectations keep a lid on any further USD gains and lend some support to the major.

Investors seem convinced that the US central bank is done with its policy tightening campaign and are now pricing in a greater chance of a 25 bps rate cut at the March policy meeting. The bets were reaffirmed by the incoming US data, which suggested that a historically tight labor market could be loosening. This, in turn, warrants some caution for aggressive traders and before positioning for an extension of the AUD/USD pair's recent sharp pullback from the vicinity of the 0.6700 mark, or over a four-month high touched on Monday.

Market participants now look to the release of the usual Weekly Initial Jobless Claims data from the US for some impetus later during the early North American session. The focus, however, will remain glued to the closely-watched US monthly employment details, popularly known as the NFP report on Friday. The data will provide fresh cues about the US labor market and influence the Fed’s policy outlook, which, in turn, will drive the USD demand and provide a fresh directional impetus to the AUD/USD pair.

Technical levels to watch