AUD/USD: Next stop comes at 0.6570

AUD/USD advances for the fifth consecutive day on Monday, climbing to three-week highs and extending its weekly recovery past the key 0.6500 hurdle, always on the back of the continuation of the downward trend in the US Dollar. Australia’s quarterly Current Account figures are due early on Tuesday.

AUD/USD Technical Overview

On the upside, the first hurdle is the weekly top at 0.6568 (August 14), prior to the 2025 ceiling at 0.6625 (July 24). A break higher would open the door to the November 2024 peak at 0.6687 (November 7), with the psychological 0.7000 level further out.

On the other hand, the initial support is currently holding at 0.6414 (August 21). A move lower would put the 200-day Simple Moving Average (SMA) at 0.6385 in focus, seconded by the June floor at 0.6372 (June 23).

Momentum signals remain mixed: the Relative Strength Index (RSI) beyond 58 shows some buying conviction, but the Average Directional Index (ADX) under 15 points to a pale trend.

Short-term outlook: Rangebound for longer?

Until a clear catalyst emerges, whether from stronger Chinese data, a shift from the Fed, or a surprise from the RBA, AUD/USD looks set to stay locked in its 0.6400–0.6600 range.

Fundamental Overview

The Australian Dollar (AUD) extended its gains on Monday, with AUD/USD pushing well past 0.6500 and adding to the ongoing robust leg higher. The move came as the US Dollar (USD) slipped, weighed down by uncertainty over White House trade policy, Federal Reserve (Fed) rate-cut bets, and renewed tensions over President Trump’s attacks on the central bank.

Inflation still running hot

Australia’s July Monthly CPI Indicator (Weighted Mean) rose to 2.8%, up from 1.9% in June, while Q2 CPI added 0.7% inter-quarter and 2.1% from a year earlier, keeping inflation concerns alive and supporting the Reserve Bank of Australia’s (RBA) cautious stance.

Resilient economic backdrop

Economic data has painted a fairly upbeat picture. The final August Manufacturing PMI came in on the strong side, up to 53.0, while the flash services print is expected at 55.1. Retail sales jumped 1.2% in June, while the trade surplus widened to A$5.365B. The labour market also yielded positive results, as unemployment dropped to 4.2%, accompanied by a 24.5K increase in jobs.

The latest release of Private Capital Expenditure showed a 0.2% increase in Q2, pointing to solid investment in buildings, structures and equipment.

RBA stays data-dependent

The RBA cut rates by 25 basis points earlier this month to 3.60% and trimmed its 2025 growth outlook. Governor Michele Bullock pushed back on calls for steeper cuts, stressing that policy remains “data-dependent”. Markets are now pricing another 25 basis point cut by November 5.

Minutes released last week suggested faster easing could be on the table if the labour market softens, though a slower path is likely if conditions remain tight.

China remains the swing factor

China’s economy remains uneven. GDP grew 5.2% YoY in Q2 and industrial output rose 7%, but retail sales were disappointing. Official PMIs came in mixed in August, with the manufacturing gauge at 49.4 and the services print up a tad to 50.3. In addition, the trade surplus narrowed, and inflation was flat. Looking at monetary policy, the People’s Bank of China (PBoC) left both its One-Year and Five-Year Loan Prime Rates (LPR) unchanged last month, as widely anticipated.

Speculators stay bearish

In its latest report, the Commodity Futures Trading Commission (CFTC) showed speculative net shorts in the Aussie Dollar climbing to levels last seen in April 2024 around 100.6K contracts for the week ending August 26. Additionally, open interest increased for the fourth consecutive week, this time to nearly 191.2K contracts.