AUD/USD recovers early losses as US Dollar struggles to extend upside

The AUD/USD pair claws back its early losses and rebounds to near 0.6590 during the European trading session on Monday. The Aussie pair bounces back as the US Dollar struggles to extend its three-day winning streak, with investors awaiting Federal Reserve Chair Jerome Powell’s speech on Tuesday.

AUD/USD Technical Overview

The AUD/USD pair is trading around 0.6590 on Monday. Technical analysis on the daily chart shows that the pair has broken below the ascending channel, indicating a potential for a bearish shift. However, the 14-day Relative Strength Index (RSI) remains above the 50 level, suggesting the bullish bias is still in play.

The AUD/USD pair may find its initial support at the crucial level of 0.6550, aligned with the 50-day EMA at 0.6548. A break below the support zone would weaken the medium-term price momentum and put downward pressure on the pair to navigate the region around the three-month low at 0.6414, which was recorded on August 21.

On the upside, a successful break above the nine-day EMA at 0.6613, which is aligned with the lower boundary of the ascending channel. A rebound to the channel would support the short-term price momentum and lead the AUD/USD pair to approach the 11-month high of 0.6707, recorded on September 17, followed by the ascending channel’s upper boundary around 0.6720.

Fundamental Overview

Reserve Bank of Australia (RBA) Governor Michele Bullock told parliament on Monday that labor market conditions have eased slightly, with unemployment ticking higher, though the market remains tight and near full employment. Bullock noted that recent rate cuts should support household and business spending, while stressing that the RBA must stay vigilant to changing conditions and be ready to respond if needed. The Board, she added, will continue to monitor data and evolving risks to guide its decisions closely.

The People’s Bank of China (PBOC), China's central bank, announced that it would leave its Loan Prime Rates (LPRs) unchanged on Monday. The one-year and five-year LPRs were at 3.00% and 3.50%, respectively.

The White House announced that US companies will take control of TikTok’s algorithm, while Americans will occupy six of seven board seats for its US operations. White House Press Secretary Karoline Leavitt said the agreement could be finalized “in the coming days,” though Beijing has not yet commented.

Australian Dollar holds losses as US Dollar extends winning streak

The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is gaining ground and trading around 97.70 at the time of writing. The focus this week is on the latest Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge, which is expected to signal subdued price pressures.

The US Department of Labour (DOL) released on Thursday, the Initial Jobless Claims went down to 231K for the week ending September 13. The latest print came in short of initial estimates of 240K and was lower than the previous week’s 264K (revised from 263K). Meanwhile, Continuing Jobless Claims shrank by 7K to 1.920M for the week ending September 6.

The Federal Reserve (Fed) lowered the funds rate by 25 basis points (bps) last week, marking the first cut of the year, and signaled a further 50 bps of easing before year-end, slightly above its June projections.

Fed Chair Jerome Powell pointed to growing signs of weakness in the labor market to explain why officials decided it was time to cut rates after holding them steady since December amid concerns over tariff-driven inflation.

China’s Ministry of Industry and Information Technology unveiled a two-year plan to stabilize the steel sector, target 4% annual value-added growth, and strictly restrict production expansion.

Australia’s seasonally adjusted Employment Change arrived at -5.4K in August from 26.5K in July (revised from 24.5K), compared with the consensus forecast of 22K. Meanwhile, the Unemployment Rate steadied at 4.2% in August, as expected.

The Reserve Bank of Australia (RBA) rate cuts. Markets now price just a 20% chance of a September cut, while odds for November stand at 70%, with above-target inflation keeping policymakers cautious.