CFD Trading Rate Australian Dollar vs US Dollar (AUDUSD)

• AUD/USD falls below 0.6700 as the US Dollar performs strongly.
• The Fed is expected to cut interest rates gradually in the remainder of the year.
• Investors await the Aussie Employment data for September.

The AUD/USD pair extends its downside below the key support of 0.6700 in Wednesday’s European session. The Aussie asset weakens as the market sentiment remains risk-averse on expectations that US former President Donald Trump could win upcoming presidential elections. Trump’s victory could have a negative impact on risk-sensitive currencies as he favors a closed economy culture.

S&P 500 futures exhibit a subdued performance in European trading hours. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rises further to near 103.40.

The Greenback posts a fresh two-month high as market participants expect that the Federal Reserve’s (Fed) policy-easing cycle will be gradual in the remainder year. According to the CME FedWatch tool, the Fed will cut interest rates by 50 basis points (bps) to 4.25%-4.50% by the year-end, suggesting that there will be two quarter-to-a-basis rate cuts, which will come in November and December.

Going forward, the next trigger for the US Dollar will be the monthly Retail Sales data for September, which will be published on Thursday. The Retail Sales data, a key measure of consumer spending, rose by 0.3%.

On the Aussie front, investors await the Employment data for September, which will be published on Thursday. The labor market data is expected to show that the Australian economy 25K new workers, lower than 47.5K in August. The Unemployment Rate is expected to remain steady at 4.2%. Sings of steady or stronger job growth would allow the Reserve Bank of Australia (RBA) to keep its Official Cash Rate (OCR) steady at 4.35%.

The Australian Dollar (AUD) could decline further to 0.6650; the major support at 0.6620 is likely out of reach. In the longer run, rapid increase in momentum is likely to lead to further AUD weakness; the levels to monitor are 0.6650 and 0.6620, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Levels to monitor are 0.6650 and 0.6620

24-HOUR VIEW: “We indicated yesterday that AUD ‘could retest the 0.6700 level before another rebound is likely.’ AUD subsequently dropped to 0.6698 but did not rebound. AUD closed at 0.6703 in NY trade (-0.34%) but dropped sharply in early Asian session today. Downward momentum is increasing rapidly, and AUD could continue to decline to 0.6650. The major support at 0.6620 is likely of reach today. To keep the momentum going, AUD must remain below 0.6715 (minor resistance is at 0.6700).”

1-3 WEEKS VIEW: “In our most recent narrative from last Thursday (10 Oct, spot at 0.6720), we indicated that ‘while there has been no significant increase in momentum, the bias for AUD remains on the downside.’ Yesterday, AUD dropped to a low of 0.6698. Today, it fell clearly below 0.6700. The price action has resulted in a rapid increase in momentum, and this is likely to lead to further AUD weakness. The levels to monitor are 0.6650 and 0.6620. On the upside, should AUD break above 0.6740 (‘strong resistance’ level previously at 0.6785), it would mean that the AUD weakness that started early this month has stabilised.”

The Australian Dollar (AUD) could retest the 0.6700 level before another rebound is likely. In the long run, bias for AUD remains on the downside; a clear break below 0.6700 would suggest further decline, potentially to 0.6670, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Break below 0.6700 may suggests decline towards 0.6670

24-HOUR VIEW: “Yesterday, we held the view that AUD ‘is likely to trade in a sideways range of 0.6710/0.6760.’ The price action did not turn out as we expected. In NY trade, AUD dropped to 0.6703 before rebounding quickly to close at 0.6726 (-0.36%). While downward momentum only increased slightly, AUD could retest the 0.6700 level before another rebound is likely. A sustained decline below 0.6700 seems unlikely. Resistance levels are at 0.6745 and 0.6760.”

1-3 WEEKS VIEW: “In our most recent narrative from last Thursday (10 Oct, spot at 0.6720), we indicated that ‘while there has been no significant increase in momentum, the bias for AUD remains on the downside.’ Although AUD dropped to 0.6703 yesterday, the decline was brief, and the movement did not result in any further increase in downward momentum. In other words, our view remains unchanged. The downward bias will remain intact provided that 0.6785 (no change in ‘strong resistance’ level) is not breached.”

• AUD/USD declines after the release of weak China trade data on Monday. 
• The pair recovers some of the losses after Fed’s Kashkari gives boost to rate-cut hopes. 

AUD/USD manages to claw back some of its earlier losses and climbs into the 0.6730s on Monday after trading down to 0.6700 following the release of weak Chinese export data, which negatively impacted the Australian Dollar (AUD) due to the two country’s close trade ties.

China Exports in September declined to 2.4% YoY from 8.4% previously and below the 6.0% expected, according to data from the National Bureau of Statistics of China. This contributed to a lower-than-expected and lower-than-previous Trade Balance for the month of $81.71 billion. The data added to the overall pessimistic view of the Chinese economy and investor disappointment at the lack of detail contained in a recently-unveiled fiscal stimulus program. 

In a speech on Saturday, Finance Minister Lan Fo’an withheld actual figures of the program but did announce Beijing would be launching a large-scale local government debt-swap program, and said the forthcoming stimulus package could mark a multi-year turning point in China's fiscal policy framework.  

A contributing factor to AUD/USD’s recovery during the US session on Monday could be a speech by Federal Reserve (Fed) Bank of Minneapolis President Neel Kashkari (non-voting member) who said that it appears likely that “further modest reductions” in the central bank’s benchmark interest rate will be appropriate in the coming quarters. The expectation of lower interest rates is negative for the US Dollar (USD) since it reduces foreign capital inflows. 

That said, the FXStreet’s FedTracker, which gauges the tone of Fed officials’ speeches on a dovish-to-hawkish scale from 0 to 10 using a custom AI model, rated Kashkari’s words as neutral, with a score of 5.6. This was also above the 4.3 average for the Fed official. 

The Australian Dollar (AUD) is likely to trade in a sideways range of 0.6710/0.6760. In the longer run, bias for AUD remains on the downside; a clear break below 0.6700 would suggest further decline, potentially to 0.6670, UOB Group’s FC analysts Quek Ser Leang and Lee Sue Ann note.

Clear break below 0.6700 to suggest further decline

24-HOUR VIEW: “We indicated last Friday that ‘the price action is likely part of a sideways trading phase, probably in a range of 0.6715/0.6770.’ AUD subsequently traded sideways, albeit in a narrower range of 0.6726/0.6759. The price movements provide no fresh clues, and further sideways trading appears likely. Expected range for today: 0.6710/0.6760.”

1-3 WEEKS VIEW: “Our most recent narrative was from last Thursday (10 Oct, spot at 0.6720), wherein ‘while there has been no significant increase in momentum, the bias for AUD remains on the downside.’ We added, ‘a clear break below 0.6700 would suggest AUD could decline further, potentially to 0.6670.’ AUD subsequently traded in a quiet manner, and we will continue to hold the same view provided that 0.6785 (no change in ‘strong resistance’ level) is not breached.”

• AUD/USD loses traction to near 0.6730 in Monday’s early Asian session.
• The weaker Chinese economic data undermines the China-proxy AUD. 
• The US PPI supports expectations of a Fed rate cut next month.

The AUD/USD pair attracts some sellers to around 0.6730 and during the early Asian session on Monday. The stronger US Dollar (USD) and China’s deflationary pressures exert some selling pressure on the major pair. Traders will take more cues from the Chinese Trade Balance data, which is due later on Monday. 

The weaker-than-expected China’s consumer and factory prices for September weigh on the Australian Dollar (AUD) as China is a major trading partner to Australia. Data released by the National Bureau of Statistics of China on Sunday showed that the nation’s Consumer Price Index (CPI) increased 0.4% YoY in September, compared to 0.6% in August. This figure was below the market consensus of 0.6%. Meanwhile, the Producer Price Index (PPI) fell 2.8% YoY in September versus -1.8% prior, weaker than the expectations of -2.5%. 

On the other hand, US PPI data reinforces expectations for a 25 basis points (bps) Federal Reserve (Fed) rate cut in November, which might cap the upside for the Greenback. The US PPI was unchanged in September, while the core PPI was up 0.2% during the same period. 

The annual PPI rose 1.8% in September, followed by the 1.9% increase seen in August, and came in above the market expectation of 1.6%. The annual core PPI rose 2.8% in the same period, surpassing analysts' estimate of 2.7%. The swaps markets show the Fed’s odds for a 25 bps rate cut at 95.6%, up from 83.3% before the PPI data, according to the CME FedWatch Tool. 

Israel Defence Forces (IDF) said on Sunday that four soldiers had been killed and more than 60 other people injured in a drone strike targeting an army base in northern Israel, per the BBC. Hezbollah has claimed responsibility for the attack. The escalating geopolitical tensions in the Middle East might boost the safe-haven flows, benefitting the USD.

• AUD/USD prints gains on Friday after US Producer Price Index (PPI) data showed inflation easing.
• The US Core PPI rose by 0.2% MoM as expected, while annual PPI declined to 1.8%, increasing the likelihood of a Fed rate cut.
• Swaps markets show a 95.6% chance of a 25 bps Fed rate cut in November, up from 83.3%.

The Australian Dollar recovered some ground against the Greenback on Friday after a measure of prices paid by producers reaffirmed that inflation is coming down, warranting further easing by the Federal Reserve. The AUD/USD trades at 0.6748, registering modest gains of over 0.12%, though it is set to post weekly losses of over 0.60%.

AUD/USD climbs as US PPI data reinforces expectations for a 25 bps Fed rate cut in November

Data from the US Bureau of Labor Statistics (BLS) showed that the Producer Price Index (PPI) for September was 0% unchanged, below August’s 0.2% Month-on-Month increase. Excluding volatile items, the so-called Core PPI expanded by 0.2% Month-on-Month as expected, down from 0.3% a prior month.

On an annual basis, PPI increased by 1.8%, down from 1.9%, while underlying prices rose by 2.8%, up from 2.6%, and missed the 2.7% mark. Today’s data and yesterday’s CPI report hint that the Fed could cut rates at the November meeting.

The swaps markets show the Fed’s odds for a 25 bps rate cut at 95.6%, substantially up from 83.3% a day ago, when traders trimmed their positions on hawkish remarks by Atlanta’s Fed Raphael Bostic, who said he is open to cut or hold rates at the upcoming two meetings.

In other data, the University of Michigan (UoM) revealed that Consumer Sentiment deteriorated slightly from 70.1 to 68.9 and missed the consensus. Americans turned pessimistic due to higher living costs, while they upward revised inflation expectations from 2.7% to 2.9% over one year.

Chicago Fed President Austan Goolsbee crossed the wires on Bloomberg, praising the progress on inflation and the labor market. He added that despite the goodish September jobs report, there are no signs of overheating.

Next week, the Australian economic docket will be scarce. Tier The Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter will cross the wires on October 15, followed by the release of jobs data on October 16.

On the US front, the calendar will feature Fed speakers, the Balance of Trade, Retail Sales, Initial Jobless Claims, Industrial Production and housing data.

AUD/USD Price Forecast: Technical outlook

From a technical standpoint, AUD/USD is in consolidation but with a slight upward bias. For buyers to resume the uptrend, they need to break above the October 9 high at 0.6761, allowing them to challenge the weekly peak at 0.6809.

Conversely, if sellers step in and push the exchange rate below the 50-day moving average (DMA) at 0.6733, it could open the door for a decline toward the 100-DMA at 0.6691.

• AUD/USD rose to the top of its long-term range, formed a bearish Tweezer Top and has weakened. 
• This is a bearish sign that suggests a reversal down is set to unfold. 

AUD/USD rose up to the top of its range during the summer in a three-wave ABC pattern (see chart) and then formed a bearish Tweezer Top Japanese candlestick reversal pattern on the weekly chart (orange-shaded circled on chart).

AUD/USD Weekly Chart 

This pattern occurs at the end of an up move when two consecutive bars peak at the same or a similar level and both have a similar length “wick”. The wick is the range that sticks out above the full body of the candle. The two candlest taken together thus resemble a “tweezer”. 

In the following week the pair has sold off, so far, and assuming the week ends as a red down candlestick (today is Friday), it will provide added bearish confirmation for the Tweezer Top. 

The long-term trend is sideways since the pair has been moving in a range for over a year. Given the principle that “the trend is your friend” the odds favor a continuation of this trend. In this case, this would imply the next move ought to be a down leg back towards the range floor. 

A break below 0.6701 (week’s lows) would provide bearish confirmation to an initial target at the cluster of major moving averages at between 0.6645 and 0.6632. 

A further break below the bottom of wave B at 0.6622 would probably signal an even deeper sell-off down to a target at 0.6400 and the range lows. 

The Australian Dollar (AUD) is likely to trade in a sideways range of 0.6715/0.6770. In the longer run, bias for AUD remains on the downside; a clear break below 0.6700 would suggest further decline, potentially to 0.6670, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Bias for AUD remains on the downside

24-HOUR VIEW: “The title of our update yesterday was ‘A break 0.6700 is not ruled out; given the mild momentum, AUD may not be able to maintain a foothold below this level.’ However, AUD did not break 0.6700, trading choppily between 0.6702 and 0.6743, before closing at 0.6742 (+0.35%). The price action is likely part of a sideways trading phase, probably in a range of 0.6715/0.6770.”

1-3 WEEKS VIEW: “We highlighted yesterday (10 Oct, spot at 0.6720) that ‘while there has been no significant increase in momentum, the bias for AUD remains on the downside.’ We added, ‘a clear break below 0.6700 would suggest AUD could decline further, potentially to 0.6670,’ and ‘the downward bias is intact provided that AUD remains below 0.6785 (‘strong resistance’ level).’ AUD subsequently dropped to 0.6702, then rebounded. We continue to hold the same view for now.”

• AUD/USD rebounds after US inflation came in higher than expected, but a soft jobs report slowed the Greenback's advance.
• US jobless claims rose to 258K, while Fed officials suggested more easing, with Atlanta Fed's Bostic open to holding rates steady.
• Australian economic focus shifts to next week's labor market data and a speech by RBA's Sarah Hunter for further policy clues.

The Australian Dollar snaps five straight days of losses and climbs over 0.35% as data showed that inflation in the United States (US) was higher than foreseen, but a soft jobs report tempered the Greenback’s advance. At the time of writing, the AUD/USD trades at 0.6738 and bounced off a daily low of 0.6699.

AUD/USD climbs above 0.6700, snapping a five-day losing streak

Wall Street ended Thursday’s session with losses after the US Bureau of Labor Statistics (BLS) revealed that the Consumer Price Index (CPI) increased by 2.4% YoY, exceeding forecasts of 2.3%, though beneath August’s 2.5%. Core CPI ticked a tenth, up from 3.2% in the previous month, and as expected, it was 3.3% YoY.

Other data showed that Initial Jobless Claims for the week ending October 5 were above the consensus of 230K and rose by 258K, up from 225K the previous week.

Federal Reserve officials seemed unaffected by the data and suggested that additional easing is coming – in the names of New York Fed John Williams, Richmond Fed Thomas Barkin, and Austan Goolsbee from the Chicago Fed. Nevertheless, Atlanta’s Fed President Raphael Bostic said he would be open to holding rates unchanged at one of the last two meetings of the year.

On Australia’s front, the docket featured a speech by Reserve Bank of Australia (RBA) Sarah Hunter, though she failed to comment on monetary policy.

Next week, the Australian economic docket will feature a speech by RBA’s Sarah Hunter on Tuesday, October 15. By Wednesday, Australia’s jobs data is expected to give some clues regarding the status of the labor market.

On the US front, Friday’s schedule will feature further Fed speakers, the Producer Price Index (PPI) release, and the University of Michigan (UoM) Consumer Sentiment.

AUD/USD Price Forecast: Technical outlook

From a technical standpoint, the AUD/USD is consolidated yet tilted to the upside. For buyers to resume the uptrend, they must clear the October 9 high at 0.6761 so they could challenge the weekly peak at 0.6809. Conversely, if sellers move in and drag the exchange rate below the 50-day moving average (DMA) at 00.6733, it could pave the way for a drop toward the 100-DMA at 0.6691.

• AUD/USD retreats from 0.6740 as traders brace for the US inflation data for September.
• The US inflation data will influence the Fed's likely interest rate action in the remainder of the year.
• Australia’s Consumer Inflation Expectations decelerated to 4% in October.

The AUD/USD pair falls back after a short-lived pullback to near 0.6740 in Thursday’s European session. The Aussie pair faces pressure as the market sentiment turn cautious ahead of the United States (US) Consumer Price Index (CPI) data for September, which is scheduled at 12:30 GMT.

S&P 500 futures have posted some losses in European trading hours, exhibiting a risk-aversion mood. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, holds onto gains near the seven-week high of 103.00.

Economists expect the headline CPI to have grown at a slower pace of 2.3% against 2.5% in August, with the core CPI – which excludes volatile food and energy prices – rising steadily by 3.2%.

Investors will pay close attention to the US inflation data for fresh cues about the Federal Reserve’s (Fed) interest rate outlook for the remaining year.

In the Asia-Pacific region, the Melbourne Institute has reported that one-year forward Consumer Inflation Expectations for October has softened significantly to 4% from 4.4% in September. Investors will focus on how soft inflation expectations will influence market expectations for Reserve Bank of Australia’s (RBA) likely policy action in the last quarter of the year. Currently, traders expect the RBA to leave its Official Cash Rate (OCR) at 4.35% by the year-end.

AUD/USD strives to end its losing streak on Thursday. The near-term outlook of the Aussie pair is uncertain as it has declined below the 20-and 50-day Exponential Moving Averages (EMAs), which trade around 0.6790 and 0.6750, respectively.

However, there is a slight chance of a bullish reversal due to a Positive Divergence formation, shown by the 14-day Relative Strength Index (RSI). The momentum oscillator has made a lower low while the higher low pattern in the asset is intact, suggesting an oversold situation in an uptrend.

A decisive recovery move above the 20-day EMA near 0.6790 could push the asset towards October 4 high of 0.6850, followed by October 3 high of 0.6888.

In an alternate scenario, the pair could witness more downside towards the 200-day EMA near 0.6660 and the August 12 high of 0.6605 if it breaks below the round-level support of 0.6700.

AUD/USD daily chart

A break 0.6700 is not ruled out; given the mild momentum, AUD may not be able to maintain a foothold below this level. Bias for AUD remains on the downside; a clear break below 0.6700 would suggest further decline, potentially to 0.6670, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

A break 0.6700 is not ruled out

24-HOUR VIEW: “We expected AUD to trade in a range between 0.6725 and 0.6780 yesterday. Instead of trading in a range, AUD edged lower to 0.6708, closing on a soft note at 0.6719 (-0.42%). Downward momentum has increased, albeit slightly. To continue to decline, AUD must remain below 0.6755 with minor resistance at 0.6735. On the downside, a break of the major support at 0.6700 is not ruled out, but given the mild momentum, AUD may not be able to maintain a foothold below this level. The next support at 0.6670 is unlikely to come under threat.”

1-3 WEEKS VIEW: “We indicated two days ago (08 Oct, spot at 0.6755) that AUD is “is expected to continue to weaken, albeit at a slower pace.” We added, “the next level to watch is 0.6700.” Yesterday, AUD edged lower to 0.6708. While there has been no significant increase in momentum, the bias for AUD remains on the downside. A clear break below 0.6700 would suggest AUD could decline further, potentially to 0.6670. The downward bias is intact provided that AUD remains below 0.6785 (‘strong resistance’ level previously at 0.6800).”

• AUD/USD trades in negative territory around 0.6715 in Thursday’s early Asian session. 
• The rising speculation of a 25 bps rate cut by the Fed in November underpins the USD. 
• The disappointment over additional China’s stimulus measures weighs on the Aussie. 

The AUD/USD pair remains under some selling pressure near 0.6715 on Thursday during the early Asian session. The further upside in the Greenback and Chinese demand concerns create a headwind for AUD/USD. Investors will closely monitor the release of the key US Consumer Price Index (CPI) inflation data, which is due later on Thursday.

The Federal Open Market Committee (FOMC) Minutes from the September meeting showed the “substantial majority” of the FOMC backed a 50-basis-point (bps) cut. Additionally, some officials would’ve preferred a 25 bps cut, and "a few others" mentioned they could have supported such a move.

The upbeat US September jobs report last week eased worries about the cooling labor market and prompted traders to raise bets of a quarter-point rate cut in November, which boosted the US Dollar (USD) broadly.

Traders will keep an eye on the US CPI inflation data on Thursday. The headline US CPI inflation is expected to decrease from 2.5% in August to 2.3% in September, while the core CPI inflation is estimated to remain unchanged compared to August’s figure at 3.2% YoY. Nevertheless, if inflation comes in softer than expected, it could open the door for a larger Fed’s easing cycle, which could exert some selling pressure on the USD. 

On the Aussie front, the disappointment over China's stimulus update, the firmer USD continue to undermine the Australian Dollar (AUD). Nonetheless, the hawkish stance from the Reserve Bank of Australia (RBA) could cap the pair’s downside. The recent data showed Retail Sales growth for August exceeding expectations, reducing the chances of an early rate cut from the RBA.

The Australian Dollar (AUD) is expected to trade in a range between 0.6725 and 0.6780. In the longer run, AUD is expected to continue to weaken, albeit likely at a slower pace. The next level to watch is 0.6700, UOB Group Quek Ser Leang and Peter Chia note.

 The next level to watch is 0.6700

24-HOUR VIEW: “After AUD fell sharply two days ago, we indicated yesterday that ‘while the weakness has not stabilised, severely oversold conditions suggest any further decline is likely part of a lower trading range of 0.6735/0.6785.’ We added, ‘a sustained break below 0.6735 appears unlikely, and the major support at 0.6700 is unlikely to come into view.’ AUD subsequently weakened more than expected to 0.6715 before rebounding to close at 0.6747 (-0.17%). Slowing downward momentum combined with oversold conditions suggests that the weakness in AUD has likely stabilised. In other words, AUD is expected to trade in a range today, probably between 0.6725 and 0.6780.”

1-3 WEEKS VIEW: “We indicated yesterday (08 Oct, spot at 0.6755) that AUD is ‘is expected to continue to weaken, albeit at a slower pace.’ We added, ‘the next level to watch is 0.6700.’ AUD then fell to 0.6715 before recovering. Short-term downward momentum has slowed to an extent, but provided that 0.6800 (‘strong resistance’ level was at 0.6825 yesterday) is not breached, there is still a chance for AUD to drop to 0.6700. A breach of the ‘strong resistance’ would mean that the weakness in AUD that started late last week has ended.”

• AUD/USD trades with negative bias for the fifth straight day amid a modest USD strength.
• Disappointment over China’s stimulus update exerts additional pressure on the Aussie.
• Traders now look to FOMC minutes for short-term impetus ahead of US inflation figures.

The AUD/USD pair attracts fresh sellers following an intraday uptick to the 0.6760 area and drifts into negative territory for the fifth straight day on Wednesday. Spot prices drop to the 0.6725-0.6720 region during the first half of the European session, closer to over a three-week low touched on Tuesday, with bears flirting with the 50-day Simple Moving Average (SMA). 

The Australian Dollar (AUD) continues to be undermined by the disappointment over China's stimulus update, which, along with a modest US Dollar (USD) uptick, exerts some downward pressure on the AUD/USD pair. China's National Development and Reform Commission stated on Tuesday that the economy is facing more complex internal and external environments and also fell short of announcing any new major stimulus plans. This, to a larger extent, overshadowed a relatively hawkish minutes from the Reserve Bank of Australia's (RBA) September meeting. 

Meanwhile, investors have been paring bets for a more aggressive policy easing by the Federal Reserve (Fed) and an oversized interest rate cut in November amid signs of a still resilient US labor market. This keeps the yield on the benchmark 10-year US government bond elevated above the 4% threshold and the USD Index (DXY), which tracks the Greenback against a basket of currencies, close to a seven-week high touched last Friday. Apart from this, a generally weaker tone around the equity markets benefits the safe-haven buck and weighs on the risk-sensitive Aussie. 

The fundamental backdrop supports prospects for an extension of the AUD/USD pair's recent retracement slide from the highest level since February 2023, around the 0.6940-0.6945 region touched last month. Bearish traders, however, seem reluctant and prefer to wait for more cues about the Fed's rate-cut path before placing fresh bets. Hence, the market focus will glued to the release of the FOMC meeting minutes later this Wednesday, which will be followed by the US Consumer Price Index (CPI) and the Producer Price Index (PPI) on Thursday and Friday, respectively.

• AUD/USD edges lower to around 0.6740 in Wednesday’s Asian session. 
• Firmer USD and lack of more Chinese major stimulus weigh on the pair. 
• The FOMC Minutes will be closely watched on Wednesday. 

The AUD/USD pair extends its decline to near 0.6740 during the Asian session on Wednesday. The stronger US Dollar (USD) and disappointment over additional China stimulus measures continue to undermine the pair.

According to the RBA September Meeting Minutes released on Tuesday, the board members discussed scenarios for lowering and raising interest rates in the future. RBI Deputy Governor Andrew Hauser said the Australian central bank will act when inflation stops being high and sticky, adding that lowering inflation is a significant task and they are not completed yet.

The comments from the National Development and Reform Commission press conference exert some selling pressure on the China-proxy Australian Dollar (AUD). Chinese officials disappoint traders without more major stimulus. 

On the other hand, traders reduce their bets on the Federal Reserve (Fed) rate cut in September, which lifts the USD broadly. According to the CME FedWatch Tool, the markets have priced in nearly an 87% chance of 25 basis points (bps) Fed rate cuts in November, up from 31.1% last week. 

Fed Vice Chair Philip Jefferson said on Tuesday the US central bank's 50 bps interest-rate cut in September was aimed at keeping the labor market strong even as inflation continues to ease. 

Looking ahead, investors await the Federal Open Market Committee (FOMC) Minutes. The attention will shift to the US Consumer Price Index (CPI) for September on Thursday. However, if the inflation report shows softer than expected outcome, it could drag the Greenback lower and create a tailwind for AUD/USD.

• AUD/USD falls further below 0.6750 amid weakness in the Australian Dollar.
• The RBA minutes didn’t offer any significant cues about the likely interest rate action for the remaining year.
• The outlook of the US Dollar will be influenced by the US CPI data for September.

The AUD/USD pair extends its losing streak for the fourth trading day on Tuesday. The Aussie asset declines to near 0.6720 as the Australian Dollar (AUD) weakens after the release of the Reserve Bank of Australia (RBA) minutes, which didn’t offer any significant cue about the likely interest rate action in the November meeting.

The RBA minutes showed that policymakers discussed scenarios for hiking interest rates or pivoting to policy normalization. However, the board remained vigilant to upside risks to inflation. Currently, financial markets expect the RBA to leave its Official Cash Rate (OCR) unchanged at 4.35% by the year-end.

Meanwhile, an absence of details about the likely size of Beijing's recently unveiled stimulus package has also dampened the Australian Dollar’s appeal, being a proxy to China’s economic growth.

In the North American region, the US Dollar (USD) has turned sideways after revisiting a seven-week high as investors await fresh cues about the Federal Reserve’s (Fed) possible monetary policy action in the remainder of the year. According to the CME FedWatch tool, the Fed is expected to cut interest rates further by 25 basis points (bps) in each of its remaining two policy meetings this year.

AUD/USD sees a sharp downside after a breakdown below the upward-sloping trendline plotted from the August 5 low around 0.6350. The Aussie asset slides below the 20- and 50-day Exponential Moving Averages (EMAs), which trade around 0.6800 and 0.6750, respectively.

The 14-day Relative Strength Index (RSI) slides to near 40.00, suggesting a weakening of momentum.

The pair could witness more downside towards the 200-day EMA near 0.6660 and the August 12 high of 0.6605 if it breaks below the round-level support of 0.6700.

In an alternate scenario, a decisive recovery move above the 20-day EMA at 0.6800 could push the asset towards October 4 high of 0.6850, followed by October 3 high of 0.6888.

AUD/USD daily chart

Weakness in Australian Dollar (AUD) has not stabilised; any further decline is likely part of a lower trading range of 0.6735/0.6785. In the longer run, AUD is expected to continue to weaken, albeit likely at a slower pace. The next level to watch is 0.6700, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

Weakness in AUD has not stabilised

24-HOUR VIEW: “Our view of sideways trading yesterday was incorrect. Instead of trading sideways, AUD fell sharply to 0.6744, before closing at 0.6759 (-0.51%). While the weakness has not stabilised, severely oversold conditions suggest any further decline is likely part of a lower trading range of 0.6735/0.6785. A sustained break below 0.6735 appears unlikely, and the major support at 0.6700 is also unlikely to come into view.”

1-3 WEEKS VIEW: “When AUD was trading at 0.6850 last Friday (04 Oct), we indicated that “there has been a slight increase in downward momentum, and the risk of AUD breaking below 0.6820 has also increased.” After AUD dropped below 0.6820, we indicated yesterday (07 Oct, spot at 0.6800) that “momentum has increased, and AUD is likely to decline further, potentially breaking below 0.6750.” AUD then broke below 0.6750 in NY trade, reaching a low of 0.6744. We continue to expect AUD to weaken, even though oversold short-term conditions could slow the pace of any further decline. The next level to watch is 0.6700. We will continue to view AUD negatively, as long as 0.6825 (‘strong resistance’ level was at 0.6855 yesterday) is not breached.”

• AUD/USD returns below 0.6800 as Fed large rate cut bets wane.
• US economic slowdown risks have been shrunk by the upbeat US NFP for September.
• Dismal market sentiment weighs heavily on the Australian Dollar.

The AUD/USD pair retreats after a short-lived pullback move slightly above the crucial resistance of 0.6800 in Monday’s European session. The Aussie asset continues its losing streak as the US Dollar (USD) gains further after the upbeat United States (US) employment data for September forced traders to unwind Federal Reserve (Fed) large rate cuts bets for the upcoming policy meeting in November.

Market participants expect the Fed to cut interest rates further by 25 basis points (bps) to 4.50%-4.75% in November after the US job report pointed a sharp increase in the number of payrolls and a stronger-than-expected wage growth. Before the US Nonfarm Payrolls (NFP) data release, financial markets were anticipating the Fed to continue with the larger-than-usual interest rate cut of 50 bps.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rises further to near 102.60.

For more clarity on the Fed’s interest rate action in November, investors will pay close attention to the US Consumer Price Index (CPI) data for September, which will be released on Thursday. The core CPI – which excludes volatile food and energy prices – is estimated to have grown steadily by 3.2%.

Meanwhile, the Australian Dollar (AUD) is under pressure due to risk-off market sentiment, driven by Middle East tensions. Historically, geopolitical risks weaken the appeal of risk-sensitive assets. Going forward, the next move in the AUD will be driven by the Reserve Bank of Australia (RBA) minutes of the September policy meeting. The RBA kept its Official Cash Rate (OCR) unchanged at 4.35% and didn’t offer any timeline to kickstart the rate-cut cycle.