The Australian Dollar (AUD) edged lower against the US Dollar (USD) on Monday, surrendering gains of over 1% made during the previous trading session. The retreat in AUD/USD comes as the greenback finds renewed support, even as market participants raise their bets on a potential interest rate cut by the Federal Reserve in September.
At Friday’s Jackson Hole symposium, Federal Reserve Chair Jerome Powell delivered a cautious message, warning of increasing risks to the labor market while reaffirming that inflation remains a pressing concern. Powell emphasized that the Fed has not reached a final decision on the September policy move, and reiterated that policy tightening may not be justified solely on speculative assessments that employment is running above sustainable levels.
Market participants remain cautious regarding the Reserve Bank of Australia’s (RBA) next move. After last week’s rate cut, speculation has resurfaced around a more aggressive easing cycle, with some investors eyeing a potential 50 basis-point cut in the November meeting, should domestic economic indicators soften further.
US Dollar Reclaims Strength Ahead of Key Data
The US Dollar Index (DXY), which tracks the greenback’s performance against a basket of six major currencies, was last seen trading near 97.90, recovering from recent losses. Market focus is now shifting toward the release of Q2 US Gross Domestic Product (GDP) figures and July’s Personal Consumption Expenditures (PCE) Price Index—widely viewed as the Fed’s preferred inflation barometer.
According to the CME FedWatch tool, markets are now pricing in an 87% probability of a 25 basis-point rate cut in September—up from 75% before Powell’s Jackson Hole address. However, the landscape remains fluid.
US Initial Jobless Claims climbed to 235,000 last week, the highest level in eight weeks and above the consensus forecast of 225,000, signaling possible labor market cooling. Meanwhile, robust PMI readings have further complicated the Fed’s policy calculus, as policymakers must reconcile resilient economic activity with emerging signs of employment weakness.
Notably, the probability of a September rate cut has since moderated to 74%, down from 82% midweek, reflecting a volatile blend of data and Fed commentary. Chicago Fed President Austan Goolsbee stated Thursday that the September meeting remains “live,” citing conflicting economic signals. Similarly, Boston Fed President Susan Collins expressed openness to a near-term rate cut, pointing to trade-related headwinds and early signs of labor softness, despite persistent short-term inflation risks.
Economic data released last week painted a mixed picture: the S&P Global US Composite PMI advanced to 55.4 in August (from 55.1), while Manufacturing PMI surged to 53.3, notably above both the previous reading of 49.8 and market expectations of 49.5. On the other hand, the Services PMI edged lower to 55.4 from 55.7, though still exceeded forecasts of 54.2.
Technical Outlook: AUD/USD Faces Key Resistance Near 0.6500
From a technical standpoint, AUD/USD is trading around 0.6480 at the time of writing. Daily chart analysis suggests the pair is attempting a breakout from its descending channel pattern, potentially signaling a shift in bias from bearish to bullish.
The first significant resistance lies at the 50-day Exponential Moving Average (EMA) of 0.6491, which aligns closely with the upper boundary of the channel near 0.6500. A decisive break above this confluence zone could pave the way for a bullish extension toward the monthly high of 0.6568, recorded on August 14, followed by the nine-month peak of 0.6625 from July 24.
On the downside, immediate support is seen at the 9-day EMA near 0.6477. A breach of this level would undermine near-term momentum and expose the pair to further downside toward the two-month low at 0.6414 (August 21), and potentially the three-month trough at 0.6372, marked on June 23.
