The Australian dollar (AUD) edged higher against the US dollar (USD) on Monday, ending a three-day losing streak as investors turned cautious ahead of the Reserve Bank of Australia’s (RBA) policy decision on Tuesday.
The AUD/USD pair remained steady around 0.6550, supported by expectations that the central bank will keep rates unchanged following recent signs of persistent inflation.
Muted reaction to domestic and Chinese data
The Australian dollar showed little immediate reaction to Monday’s economic data from Australia and China. The TD-MI Inflation Gauge rose 0.3% month-on-month in October, easing slightly from 0.4% in September, while the annual gauge edged higher to 3.1% from 3.0%. Building permits jumped 12.0% MoM, beating market forecasts of 5.5%, whereas ANZ job advertisements fell for a fourth consecutive month, down 2.2%.
In China, the RatingDog Manufacturing PMI declined to 50.6 in October from 51.2 in September, missing expectations of 50.9. Given Australia’s strong trade ties with China, any slowdown in the latter’s industrial activity often carries implications for the AUD’s performance.
Geopolitical risks and trade tensions return
Market sentiment turned cautious after US President Donald Trump stated that his administration plans to block China from accessing Nvidia’s advanced semiconductor technology.
The comments, reported by CBS News, threaten to reignite US-China trade tensions just days after Trump’s meeting with Chinese President Xi Jinping during the APEC Summit in South Korea. Renewed geopolitical friction typically weighs on risk-sensitive currencies such as the Australian dollar.
RBA likely to maintain steady policy amid sticky inflation
The RBA is widely expected to hold interest rates steady after three consecutive cuts earlier this year. Inflation data for Q3 showed that both headline and trimmed mean CPI remained within the 2–3% target range, reducing pressure for immediate policy easing. The trimmed mean CPI rose 1.0% on a quarterly basis and 3.0% annually, both above market estimates.
Similarly, August’s monthly CPI reading of 3.5% YoY came in hotter than expected. RBA Governor Michele Bullock recently remarked that the labor market remains relatively tight, despite a modest rise in unemployment, suggesting the central bank will remain cautious before signaling further adjustments.
US dollar supported by hawkish Fed tone
The US dollar continued to trade near 99.80 on the US Dollar Index (DXY) as investors scaled back bets on a December rate cut. Fed funds futures now price a 69% probability of a cut, down sharply from 93% a week earlier, according to the CME FedWatch Tool.
Last week, the Federal Reserve cut rates by 25 basis points to a range of 3.75%–4.00%, though Chair Jerome Powell emphasized that another cut is not guaranteed in December. The cautious tone from policymakers, coupled with the ongoing US government shutdown—now entering its sixth week—has reinforced investor uncertainty.
Technical outlook: AUD/USD consolidates near 0.6550
From a technical perspective, AUD/USD is consolidating within a rectangle pattern on the daily chart, signaling indecision among traders. The pair currently trades slightly above the nine-day Exponential Moving Average (EMA) at 0.6544, indicating a modest short-term bullish bias.
Immediate resistance lies at 0.6600, followed by 0.6630, the upper boundary of the rectangle. A sustained move above this zone could pave the way toward the 13-month high of 0.6707, recorded on September 17. On the downside, a break below 0.6544 could expose the pair to 0.6460, the lower boundary of the rectangle, and further toward the five-month low of 0.6414.
