AUD/USD jumps to near 0.6570 as US Dollar underperforms, RBA policy in focus

The AUD/USD pair trades 0.35% higher around 0.6570 during the European trading session on Monday. The Aussie pair trades firmly as the US Dollar underperforms its peers amid fears that the United States won’t be able to avert a shutdown after the fiscal year ending September 30.

AUD/USD Technical Overview

Technically, further weakness should not be ruled out.

The loss of the weekly trough at 0.6520 (September 26) could open the door to a test of the interim 100-day Simple Moving Average (SMA) at 0.6517. A clear break lower would open the way back to the August low at 0.6414 (August 21), with the 200-day SMA nearby at 0.6400. Below that lies the June trough at 0.6372 (June 23).

On the upside, if buyers regain control, the pair could retest the September ceiling at 0.6707 (September 17). A clean move through there would put last year’s high at 0.6942 (September 30) on the radar, just shy of the psychological 0.7000 mark.

Momentum indicators remain mixed: The Relative Strength Index (RSI) has bounced to nearly 81, hinting at some resurgence of the buying pressure, while the Average Directional Index (ADX) deflating to roughly 16 suggests the trend is still relatively weak.

Near-term outlook

For now, AUD/USD remains stuck in a broad 0.6400–0.6700 range. A decisive breakout likely needs a catalyst, perhaps stronger Chinese data, a softer Federal Reserve tone, or a surprise hawkish twist from the RBA.

Fundamental Overview

The Australian Dollar (AUD) kicked off the week on a solid footing. AUD/USD climbed to fresh two-day highs in the 0.6570–0.6580 band, extending the recovery that began on Friday.

Why the bounce? The US Dollar (USD) started the week under pressure, weighed down by fears of a possible US government shutdown. On top of that, traders are betting the Federal Reserve (Fed) will cut its interest rates further, which kept the US Dollar Index (DXY) under pressure.

The economy’s resilience

Australia’s economy has shown more grit than many expected. Early September figures suggest the Manufacturing PMI may slip to 51.3 and Services PMI to 52.0, but both readings remain above the 50 threshold, meaning activity is still expanding.

Other data has been encouraging too. Retail sales jumped 1.2% in June, the trade surplus widened to A$7.3 billion in July, and business investment edged higher in the April-June period. Looking at the broader economic activity, GDP also held steady, rising 0.6% inter-quarter and 1.8% YoY in Q2.

Still, the labour market is flashing some caution signs: Unemployment stayed at 4.2% in August, but the Employment Change slipped by 5.4K jobs.

RBA walking a fine line

Inflation remains a sticking point. July’s Monthly CPI Indicator (Weighted Mean) accelerated to 2.8%, up from 1.9% in June. On a quarterly basis, Q2 CPI increased 0.7% QoQ and 2.1% over the last twelve months.

That backdrop explains why the Reserve Bank of Australia (RBA) isn’t rushing to ease policy: With inflation still above target, policymakers are wary of cutting too quickly and reigniting price pressures.

Earlier in September, the RBA trimmed the Official Cash Rate (OCR) by 25 basis points, bringing it down to 3.60%, and at the same time lowered its 2025 growth forecast. Governor Michele Bullock has made it clear deeper cuts aren’t on the agenda right now. She stressed that policy will remain data-dependent, and the Minutes echoed that: If the labour market weakens further, the pace of cuts could quicken; if the economy holds up, easing will be gradual.

In testimony to the House Economics Committee, Bullock described growth and inflation as being in a “good place,” signalling no rush to change course.

Markets seem aligned with that view. Ahead of Tuesday’s meeting, traders broadly expect rates to stay on hold. Futures pricing implies around 18 basis points of easing by year-end.

China still holds the cards

Australia’s fortunes remain closely tied to China. In Q2, Chinese GDP grew at an annualised 5.2%, but August retail sales underwhelmed at 3.4%. Furthermore, PMIs were mixed: manufacturing slipped into contraction at 49.4, while services just about clung to expansion at 50.3. Deflation worries also persist, with CPI down 0.4% in the year to August.

The People’s Bank of China (PBoC) kept its Loan Prime Rates (LPR) unchanged in September: 3.00% for the one-year and 3.50% for the five-year, exactly as markets expected.

Positioning still negative

Speculators remain sceptical about the Aussie. Commodity Futures Trading Commission (CFTC) data for the week ending (September 23) showed net shorts rising to roughly 101.6K contracts, a two-week high. In addition, open interest also climbed to two-week tops, around 160.8K contracts.