The Australian Dollar (AUD) extends its two-week uptrend against a broadly softer US Dollar (USD), pushing to its strongest level since late October during Wednesday’s Asian session. Waning expectations for further policy easing by the Reserve Bank of Australia (RBA) have helped offset weaker domestic growth data and continue to underpin the Aussie.
RBA’s hawkish tone offsets soft Q3 GDP
Data from the Australian Bureau of Statistics showed the economy expanded by 0.4% in Q3, easing from 0.6% in Q2, while annual GDP growth rose to 2.1% from 1.8%. Both readings fell short of expectations and initially pressured the AUD.
However, RBA Governor Michele Bullock signaled a cautious stance on inflation, noting that the central bank is assessing whether recent price pressures are temporary. She added that persistent inflation would have implications for future policy — comments that dampen hopes for further easing and support the currency.
Australia’s headline CPI accelerated to 3.8% YoY in October, up from 3.5%, while trimmed mean inflation edged higher to 3.3%. With inflation still above the RBA’s 2–3% target band, markets see limited room for rate cuts.
China data soft, but risk appetite and USD weakness boost Aussie
China’s Services PMI slipped to 52.1 in November from 52.6, though it remained above forecasts. The figure did little to dent bullish sentiment toward the China-proxy AUD.
Meanwhile, the USD trades near its lowest level since November 14 as markets price in nearly a 90% chance of a 25-basis-point Federal Reserve (Fed) rate cut on December 10, according to the CME FedWatch Tool. Speculation that Kevin Hassett – viewed as a dovish pick – could succeed Jerome Powell as the next Fed Chair is adding further downside pressure to the Greenback.
Improved risk appetite, supported by lower expected US interest rates and hopes for progress in Russia-Ukraine negotiations, has also weighed on the safe-haven USD and boosted the risk-sensitive AUD. Traders now await the US ADP employment report and ISM Services PMI for fresh direction.
The main focus this week remains Friday’s US Personal Consumption Expenditure (PCE) Price Index, which will be key for determining the Fed’s rate-cut trajectory and the next significant move in AUD/USD.
AUD/USD technical outlook: bulls target 0.6600 and beyond
AUD/USD’s breakout above a descending trendline from the September highs and its sustained move above the 100-day Simple Moving Average (SMA) reinforce the bullish structure. Momentum indicators continue to trend higher without signaling overbought conditions, suggesting that dips toward the 0.6535–0.6530 breakout area are likely to attract buyers.
The next support sits at 0.6500, followed by the 200-day SMA near 0.6465. A break below these levels could expose the pair to November’s multi-month low near 0.6420 and, ultimately, the 0.6400 mark.
On the upside, AUD/USD looks poised to extend its two-week rally toward the 0.6600 handle. A decisive move above this level could open the door for a climb toward the 0.6660–0.6665 resistance zone, with a potential test of the year-to-date highs just above 0.6700 seen in September.
