AUD/USD wobbles around 0.6600 ahead of key US data release

AUD/USD trades sideways around 0.6600 ahead of the release of the US data. Investors will closely monitor the US Initial Jobless Claims data for fresh cues on the current status of the labor market. The RBA is expected to maintain the status quo on Tuesday.

AUD/USD Technical Overview

Technically, the sell-off still has room to run. AUD/USD is testing its 55-day and 100-day Simple Moving Averages (SMAs), sitting at 0.6537 and 0.6540, respectively. 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 flip side, if buyers regain control, the pair could retest the September ceiling at 0.6707 (September 17). A clean move through there would put the 2024 high at 0.6942 (September 30) on the radar, just shy of the psychological 0.7000 mark.

Momentum indicators lean bearish: The Relative Strength Index (RSI) has slipped to around 45, hinting at downside pressure, while the Average Directional Index (ADX) near 18 suggests the trend still looks pale.

Near-term outlook

Right now, AUD/USD is stuck in a bit of a holding pattern, drifting between 0.6400 and 0.6600 without much conviction. To really break out of that range, the market probably needs a bigger nudge, maybe a run of stronger numbers out of China, a softer shift from the Federal Reserve (Fed), or the RBA surprising with a tougher stance.

Fundamental Overview

The Australian Dollar (AUD) kept sliding on Thursday, with AUD/USD hovering near three-week lows around 0.6540. That makes it three straight days in the red.

What’s driving the move? The US Dollar Index (DXY) keeps pushing higher, helped by firm data and another lift in US yields across the curve.

Inflation still keeping the RBA on edge

Australia’s inflation story isn’t over yet. July’s Monthly CPI Indicator (Weighted Mean) picked up to 2.8%, up from 1.9% in June. On a quarterly basis, Q2 CPI rose 0.7% and 2.1% YoY.

That explains why the Reserve Bank of Australia (RBA) is staying cautious. With prices running hotter than target, policymakers aren’t keen to cut rates too fast. They are balancing their support for growth with the avoidance of a new wave of inflation.

The economy is holding its ground

Despite global headwinds, Australia’s economy is proving sturdier than many feared. Early numbers for September suggest Manufacturing PMI could ease to 51.3 and Services PMI to 52.0, but both readings remain in growth territory.

Other indicators have looked solid too. Retail Sales rose 1.2% in June, the trade surplus widened to A$7.3 billion in July, and business investment ticked higher in Q2. GDP has also been steady, up 0.6% vs. the previous quarter and 1.8% from a year earlier in Q2.

The labour market shows a few warning signs. Unemployment was unchanged at 4.2% in August, but total employment slipped by 5.4K jobs.

RBA holding steady, watching the data

Earlier in September, the RBA trimmed the Official Cash Rate (OCR) by 25 basis points, bringing it down to 3.60%. At the same time, it lowered its 2025 growth forecast.

Governor Michele Bullock has made it clear that deeper cuts aren’t on the table right now, stressing that policy will stay data-driven. The Minutes backed that up: if the labour market deteriorates further, the RBA might speed up cuts; if the economy holds steady, easing will be gradual.

In her remarks to the House Economics Committee, Bullock said both growth and inflation were in a “good place”, signalling there’s no urgency to shift course.

Markets seem to agree. For next week’s meeting, investors expect the RBA to keep rates unchanged, while implied rates see just over 15 basis points of easing by the end of the year.

China remains the wild card

Australia’s outlook is still closely tied to China. Q2 GDP grew 5.2% year-on-year, but August retail sales disappointed at 3.4%. PMIs were mixed: Manufacturing dipped into contraction at 49.4, while Services barely stayed above water at 50.3. Deflation worries haven’t gone away either, with the CPI falling 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.

Traders trimming bearish bets

Positioning is also shifting. CFTC data for the week ending September 16 showed speculators cutting back on AUD shorts, with net bearish contracts down to 51.2K, the lowest since May. That said, overall open interest fell sharply to around 154K, meaning traders have generally reduced exposure.