The Australian Dollar (AUD) advanced against the US Dollar (USD) on Friday, regaining traction after losses in the previous session. The AUD/USD pair strengthened following cautious yet supportive comments from Reserve Bank of Australia (RBA) Governor Michele Bullock, which helped bolster sentiment around the local currency.
RBA maintains cautious tone amid sticky inflation
Governor Bullock noted that services inflation remains somewhat sticky, adding that second-quarter inflation was slightly above forecasts but is still “moving in the right direction.” She emphasized the need for prudence given the volatility of monthly CPI data and highlighted that the labor market remains tight but may be approaching balance.
Australia’s Consumer Inflation Expectations for October rose to 4.8%, up from 4.7% in September—the highest level since June—fueling concerns that inflation could exceed projections in the third quarter. The RBA is widely expected to hold its Official Cash Rate (OCR) at 3.6% after maintaining that level at its September meeting.
Australian Dollar gains ground despite steady US Dollar
The US Dollar Index (DXY) held firm around 99.40, consolidating after a four-day rally, while political gridlock in Washington continued as the US Senate failed to advance measures to end the ongoing government shutdown.
The FOMC minutes from the September meeting indicated that policymakers lean toward further rate cuts this year, with the CME FedWatch Tool showing a 95% probability of an October cut and an 82% chance of another in December. Fed Board member Stephen Miran said monetary policy needs to ease to align with a lower neutral rate, while Minneapolis Fed President Neel Kashkari cautioned that it’s too early to judge whether tariff-led inflation will persist. In contrast, Kansas City Fed President Jeffrey Schmid took a more hawkish stance, stressing that “inflation is still too high” and that the Fed must preserve its credibility.
Domestic data remains mixed
Australian data this week painted a mixed economic picture. Private house approvals declined 2.6% MoM in August, while Building Permits dropped 6% MoM, marking a second consecutive monthly decline. Westpac Consumer Confidence fell 3.5% MoM in October to 92.1, its steepest drop since April, and ANZ Job Advertisements slipped 3.3% MoM in September.
On the inflation side, the TD-MI Inflation Gauge rebounded 0.4% MoM in September after a 0.3% fall previously, bringing the annual rate to 3%, up from 2.8%.
Technical outlook: AUD/USD rebounds within ascending channel
The AUD/USD pair trades near 0.6570, rebounding toward the ascending channel on the daily chart, signaling a potential revival of the short-term bullish bias. However, the 14-day Relative Strength Index (RSI) remains below 50, reflecting lingering downside momentum.
Immediate support is seen near the 50-day Exponential Moving Average (EMA) at 0.6563. A sustained break below this level could weaken medium-term momentum and expose the pair to 0.6414 (August 21 low) and 0.6372 (five-month low).
On the upside, a move above the nine-day EMA at 0.6582 could strengthen bullish momentum, paving the way toward the 12-month high of 0.6707 (September 17) and potentially the channel’s upper boundary near 0.6810.
