The Australian Dollar (AUD) trades in an erratic performance on Thursday, with AUD/USD orbiting around the 0.6480 zone and managing to regain some breathing room following Wednesday’s sharp pullback.
The pair’s absence of direction comes amid the extra advance in the US Dollar (USD), as investors continue to digest the mixed results from the US labour market report in September and fading hopes of a rate cut by the Federal Reserve (Fed) at its December gathering.
Australia: Ticking along, not taking off
Australia’s economy isn’t firing on all cylinders, but it’s certainly not stalling either. The October PMIs were a bit of a mixed story: Manufacturing slipped back below the 50 mark to 49.7 (from 51.4), while Services nudged up to 53.1 (from 52.4). With that in mind, investors will be paying attention to November’s preliminary numbers when they land early in Friday’s Asian session.
In addition, Retail Sales held up reasonably well with a 1.2% rise in June, and the trade surplus widened to A$3.938 billion in September. Additionally, Business Investment also improved in Q2, helping GDP grow 0.6% QoQ and 1.1% YoY. Not the stuff of headlines, but steady enough to keep things moving.
The labour market added another layer of resilience: October’s Unemployment Rate dipped to 4.3%, and Employment Change bounced back with a +42.2K print after a quieter spell. It’s the sort of recovery that suggests conditions might be firming up again.
China: Still steering the external narrative
China remains the key variable for Australia, and the latest data points to a recovery that’s ongoing but not really accelerating.
That said, the Chinese economy expanded by 4.0% YoY in Q3, while October Retail Sales grew 2.9% YoY. Further data saw the RatingDog Manufacturing PMI soften to 50.6 and Services recede to 52.6, hinting at a slight loss of momentum, while Industrial Production also underwhelmed, rising 4.9% over the last twelve months.
The trade figures echoed the above, as the surplus narrowed from $103.33 billion to $90.45 billion in September. Inflation, however, offered a small surprise: headline CPI bounced back to 0.2% YoY on holiday spending, beating expectations after September’s 0.3% drop. Core CPI also firmed to 1.2%, matching its high from February.
As expected, the People’s Bank of China (PBoC) left its Loan Prime Rates (LPR) unchanged on Thursday: 3.00% for the one-year and 3.50% for the five-year.
RBA: Taking things as they come
The Reserve Bank of Australia (RBA) kept rates at 3.60% for a second straight meeting in early November, exactly as most anticipated. The tone stayed measured, with no rush to move policy in either direction.
The RBA noted that inflation remains a bit sticky and that the labour market is still relatively tight, even with the recent rise in unemployment. Governor Michele Bullock described policy as “pretty close to neutral,” signalling little appetite for near-term hikes or cuts.
She also pointed out that the 75 basis points of easing already in place hasn’t fully worked its way through the system yet. Policymakers want a clearer sense of where demand is heading before adjusting again.
Markets are broadly aligned: there’s around a 92% chance of no change at the December 9 event, and just over a basis point of easing priced in by the end of 2026.
The November Minutes added some nuance, highlighting three key reasons to keep rates steady: stronger-than-expected demand, sticky inflation or weak productivity, or the Board’s sense that policy is still somewhat restrictive.
On the other hand, they laid out two conditions that could justify more easing: a genuine softening in the labour market or a noticeable shift toward caution in household spending.
Technical view
While further consolidation seems likely in the short term, the outlook for AUD/USD could start to deteriorate if the pair breaches below its critical 200-day SMA around 0.6460 in a convincing fashion.
So, the loss of the 200-day SMA exposes a potential slide toward the October base at 0.6440 (October 14), followed by the August trough at 0.6414 (August 21) and the June floor of 0.6372 (June 23).
Conversely, minor resistance levels are expected at the November high at 0.6580 (November 13) ahead of the October top of 0.6629 (October 1). North from here emerges the 2025 ceiling of 0.6707 (September 17) before the 2024 high at 0.6942 (September 30) and the 0.7000 threshold.
Additionally, momentum indicators underpin the case for extra weakness, with the Relative Strength Index (RSI) hovering around the 42 level and the Average Directional Index (ADX) just above 12, indicative that the current trend still lacks colour.
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All in all
AUD/USD is still moving within its usual 0.6400–0.6700 range. It’ll likely take a real catalyst to break that pattern, be it stronger Chinese data, a meaningful shift from the Fed, a different tone from the RBA, or an improvement in US–China relations. That said, a break below the 200-day SMA could rekindle selling pressure and give AUD another push lower.
