AUD/USD faces extra rangebound trade

AUD/USD manages to clinch modest gains on Wednesday amid the continuation of the strong upward trend in the US Dollar. The pair, in the meantime, manages to partially offset Tuesday’s deep pullback and remains stuck in a consolidative range so far this month. Next on tap in Oz will be the Consumer Inflation Expectations.

AUD/USD Technical Overview

AUD/USD could be in the early stages of a consolidative move.

That said, if bulls regain the initiative, AUD/USD should face its immediate hurdle at its 2025 ceiling at 0.6707 (September 17), prior to the 2024 high at 0.6942 (September 30), all before the key 0.7000 yardstick.

In opposition, there is an initial support at the weekly trough at 0.6520 (September 26), which looks underpinned by the transitory 100-day Simple Moving Average (SMA). A deeper pullback could drag the pair to the August valley at 0.6414 (August 21), again bolstered by the important 200-day SMA. Down from here comes the June low at 0.6372 (June 23).

Momentum indicators remain mixed: the Relative Strength Index (RSI) has deflated below 49, suggesting that bears could be regaining control, while the Average Directional Index (ADX) below 16 keeps indicating the absence of a strong trend.

Waiting for a spark

All told, AUD/USD remains trapped in a broad 0.6400–0.6700 range. It’ll likely take a stronger catalyst like better Chinese data, a dovish tilt from the Fed, or a more cautious RBA to push the pair decisively in either direction.

Fundamental Overview

The Australian dollar (AUD) spent Wednesday flipping between small gains and losses against the US dollar (USD), with AUD/USD hovering near 0.6580 after dipping to multi-day lows around 0.6550 earlier in the session.

The choppy action reflected another round of strength in the Greenback, as the US Dollar Index (DXY) climbed to new two-month highs, just shy of the 99.00 mark.

Domestic resilience holds up

Despite the softer market tone, Australia’s economy continues to show resilience. September’s final manufacturing and services PMIs eased slightly but stayed above 50, signalling that activity is still expanding.

Retail sales rose 1.2% in June, the August trade surplus narrowed only marginally to A$1.825 billion, and business investment kept rising through Q2. GDP grew 0.6% inter quarter and 1.8% over the last twelve months, not spectacular, but steady enough.

The labour market has cooled a little over the summer. The jobless rate stayed at 4.2% in August, but total employment slipped by 5.4K people. It’s not a major concern, though it hints that momentum is starting to soften at the edges.

RBA remains wary

Inflation remains a sticking point for the Reserve Bank of Australia (RBA). The August Monthly CPI Indicator (Weighted Mean) edged up to 3.0% from 2.8%, while Q2 CPI rose 0.7% QoQ and 2.1% YoY.

That was enough for the RBA to stay cautious at its 30 September meeting. The cash rate was left at 3.60%, as expected, but officials toned down earlier hints of potential easing. Policymakers warned that disinflation might be slowing after the latest CPI surprise, with Q3 inflation possibly running hotter than the 2.6% forecast.

Governor Michele Bullock reiterated that decisions will stay data-driven and made one meeting at a time. Rate cuts aren’t ruled out, but the RBA wants clearer signs that supply and demand pressures are genuinely easing.

For now, the trimmed mean CPI at 2.7% YoY in Q2 sits comfortably inside the RBA’s 2–3% target band. Markets are pricing in around 15 bps of easing by year-end and roughly 30 bps by the end of 2026.

China still steering the story

Australia’s outlook remains tightly linked to China’s uneven recovery. Q2 GDP rose 5.2% YoY, but August retail sales missed at 3.4%. September PMIs painted a mixed picture, with manufacturing staying in contraction at 49.8, and services barely holding the 50.0 line. Meanwhile, August CPI fell 0.4% YoY, keeping deflation risks in play.

Furthermore, the People’s Bank of China (PBoC) kept its Loan Prime Rates (LPR) unchanged in September: the one-year at 3.00% and the five-year at 3.50%, as widely anticipated.

Traders remain cautious

Speculative appetite for the Aussie remains limited. With new Commodity Futures Trading Commission (CFTC) data delayed by the US government shutdown, the latest available figures to September 23 showed net shorts rising to two-week highs around 101.6K contracts, while open interest ticked up to 160.8K contracts.