The Australian Dollar (AUD) edged lower against the US Dollar (USD) on Tuesday, trimming some of its previous session’s gains as investors digested a series of soft domestic data releases and maintained their preference for the Greenback. The AUD/USD pair weakened following the release of October’s Westpac Consumer Confidence and September’s ANZ Job Advertisements, while broader USD strength persisted despite rising expectations for additional Federal Reserve (Fed) rate cuts and the continuation of the US government shutdown.
Australian confidence and labor data show further weakness
Australia’s Westpac Consumer Confidence dropped 3.5% month-over-month (MoM) to 92.1 in October, accelerating from a 3.1% decline previously and marking the sharpest fall since April. Meanwhile, ANZ Job Advertisements tumbled 3.3% MoM in September, a steep decline compared to August’s marginal 0.3% dip, underscoring growing signs of labor market softness.
Monday’s TD-MI Inflation Gauge hinted that inflation may run hotter than expected in the third quarter, posing challenges for the Reserve Bank of Australia (RBA) as it seeks to guide inflation back within its 2–3% target range.
The RBA left its Official Cash Rate (OCR) unchanged at 3.6% during its September policy meeting but cautioned that inflation remains more persistent than anticipated—particularly in services—while labor market conditions continue to be tight.
Market participants will focus this week on remarks from RBA officials for further clarity on the central bank’s monetary policy trajectory, especially following the latest inflation data.
US Dollar remains supported despite political and economic headwinds
The US Dollar Index (DXY), which tracks the USD against a basket of six major currencies, extended gains to trade near 98.10 at the time of writing. According to the CME FedWatch Tool, markets are currently pricing in a 94% probability of a Fed rate cut in October and an 84% likelihood of another cut in December.
Kansas City Fed President Jeffrey Schmid maintained a hawkish tone on Monday, emphasizing that inflation remains too high and that the Fed must preserve its credibility. He added that current monetary policy settings are appropriate given economic conditions.
In Washington, US lawmakers failed for the fourth time to pass funding bills to reopen the federal government, prolonging the shutdown into another week. The closure has disrupted key federal operations and delayed major economic releases, including September’s nonfarm payrolls data originally scheduled for last Friday.
The latest ADP Employment Change report showed private-sector payrolls fell by 32,000 in September, with annual pay growth at 4.5%. This followed a downwardly revised 3,000 decrease in August and came well below the expected 50,000 increase. Job openings edged slightly higher from 7.21 million to 7.23 million in August, but the hiring rate slipped to 3.2%—the lowest since June 2024—indicating a cooling labor market.
In geopolitical developments, the White House announced that Australian Prime Minister Anthony Albanese and US President Donald Trump will meet in Washington, D.C. on October 20 to discuss the Aukus nuclear submarine partnership and regional security matters.
Meanwhile, the TD-MI Inflation Gauge rose 0.4% MoM in September, rebounding from a 0.3% drop in August. On an annual basis, inflation increased to 3.0%, up from 2.8% previously.
AUD/USD technical outlook: pair holds near 0.6600 support
The AUD/USD pair traded around 0.6610 on Tuesday, hovering near the 0.6600 psychological level and its nine-day Exponential Moving Average (EMA) at 0.6602. Technical indicators on the daily chart show the pair moving within an ascending channel, reflecting a modest bullish bias. The 14-day Relative Strength Index (RSI) remains above 50, reinforcing this view.
On the upside, a break above the 12-month high of 0.6707, recorded on September 17, could pave the way for a test of the upper channel boundary near 0.6790. Conversely, sustained weakness below 0.6600 would expose the 50-day EMA at 0.6563 and the lower channel boundary around 0.6560. A decisive move below this zone could trigger a bearish reversal, opening the door toward the August 21 low of 0.6414.
