The Australian Dollar (AUD) steadied on Monday against the US Dollar (USD) after posting gains of more than 1% in the previous session, amid shifting expectations for monetary policy from both the Federal Reserve (Fed) and the Reserve Bank of Australia (RBA). The AUD/USD pair is currently trading around 0.6480, showing little movement as traders digest a combination of macroeconomic data, central bank signals, and technical levels. This detailed piece from Primeber Group offers a clear and expert perspective on the topic, authored by Kevin Ross.
Market participants are weighing a rising likelihood of a Federal Reserve rate cut in September against expectations that the RBA could resume easing in November with a larger 50 basis-point rate cut. According to the CME FedWatch Tool, the probability of a 25-basis-point Fed rate cut at the upcoming meeting now stands at 87%, up from 75% before Fed Chair Jerome Powell’s remarks at the Jackson Hole symposium.
Powell highlighted that risks to the labor market were increasing but emphasized that inflation pressures remain a concern. He stressed that the Fed would not tighten policy based solely on uncertain estimates of employment exceeding its maximum sustainable level, leaving the door open for potential monetary easing depending on upcoming economic indicators.
Meanwhile, investors expect the RBA to maintain a cautious stance following last week’s rate cut, but market consensus points to the possibility of a 50 bps easing in November. This potential move reflects ongoing concerns about domestic growth and inflation dynamics in Australia, which continue to influence the AUD/USD currency pair.
U.S. dollar recovers modestly as traders await economic data
The US Dollar Index (DXY), which measures the USD against a basket of six major currencies, is trading around 97.90, recovering some of its recent losses. Traders are closely monitoring upcoming US macroeconomic releases, including the Q2 Gross Domestic Product (GDP) Annualized and July Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred gauge of inflation.
Recent labor market data suggests mixed signals. U.S. initial Jobless Claims rose to 235K, marking an eight-week high and exceeding expectations of 225K, suggesting potential softening in labor market conditions. Meanwhile, the preliminary S&P Global US Composite PMI for August picked up to 55.4, with the Manufacturing PMI climbing to 53.3, surpassing market expectations of 49.5, while Services PMI eased slightly to 55.4 from 55.7 but remained above forecasts.
These data points highlight the Fed’s ongoing challenge of balancing persistent inflation pressures against signs of slowing employment growth. According to the CME FedWatch Tool, traders’ expectations for a rate cut in September shifted slightly to a 74% probability, down from 82% earlier in the week, reflecting evolving market sentiment in response to mixed data.
Chicago Fed President Austan Goolsbee emphasized that the September Fed meeting remains open for action, noting that the Fed is receiving mixed economic signals. Boston Fed President Susan Collins also signaled openness to a rate cut as soon as September, citing tariff-related headwinds and potential labor market softening, even as near-term inflation risks persist.
Technical outlook: AUD/USD approaches key resistance
From a technical perspective, the AUD/USD pair is attempting to break above a descending channel pattern on the daily chart, signaling a potential shift from bearish to bullish bias. Immediate resistance is observed near the 50-day Exponential Moving Average (EMA) at 0.6491, which aligns closely with the upper boundary of the descending channel around 0.6500.
A successful break above this confluence resistance zone could reinforce the bullish outlook, potentially pushing the pair toward the monthly high of 0.6568, recorded on August 14, and subsequently toward the nine-month high of 0.6625 from July 24.
On the downside, the pair may find support at the nine-day EMA of 0.6477. A breach below this level could undermine short-term bullish momentum, putting pressure on AUD/USD to test the two-month low of 0.6414 from August 21 and potentially the three-month low of 0.6372, recorded on June 23.
Traders are likely to monitor key technical indicators, including moving averages, support and resistance zones, and the descending channel trendline, alongside evolving economic data and central bank commentary, to guide short-term trading strategies.
Conclusion
The Australian Dollar remains relatively steady as the US Dollar recovers some losses amid a rising likelihood of a Fed rate cut in September. Market focus is divided between the US macroeconomic outlook, including GDP, PCE, and labor market data, and the RBA’s potential easing in November.
From a technical perspective, the AUD/USD pair is testing a critical confluence resistance zone around 0.6500, with the potential for a bullish breakout if momentum continues. Traders are advised to monitor both fundamental developments and technical indicators closely in the coming days.
