Australian Dollar Price Forecast: Extra losses likely below the 200-day SMA
- AUD/USD trades with acceptable gains around the 0.6500 neighbourhood.
- The US Dollar comes under fresh selling pressure in the wake of ADP data.
- The RBA is widely expected to keep its OCR unchanged in December.
The Australian Dollar (AUD) traded in a volatile fashion on Tuesday, prompting AUD/USD to exchange gains and losses just below the key 0.6500 mark.
The pair’s price action comes despite slight losses in the US Dollar, which drag the US Dollar Index (DXY) back to the 99.50 region in a context of a generalised pullback in US Treasury yields.
Australia: Not booming, but holding its ground
Australia’s economy isn’t firing on all cylinders, but it’s proving sturdier than many thought. The October PMIs told a mixed story: Manufacturing slipped back below the 50 mark to 49.7 (from 51.4), while Services nudged higher to 53.1 (from 52.4).
Retail Sales rose 1.2% in June, and the September trade surplus widened to A$3.938 billion. Business investment picked up in Q2, helping GDP to grow 0.6% on the quarter and 1.1% over the year, nothing spectacular, but steady enough to keep things moving.
The labour market added to the sense of resilience: October’s Unemployment Rate dipped to 4.3% (from 4.5%), and Employment Change jumped +42.2K. After a softer patch, this rebound suggests conditions might be firming up again.
China: Still the swing factor
China continues to dominate Australia’s outlook, for better or worse.
Chinese GDP rose 4.0% YoY in Q3, while October Retail Sales grew 2.9% from a year earlier. The RatingDog Manufacturing PMI eased to 50.6 and Services slipped to 52.6, hinting that the recovery is losing a bit of momentum. Industrial Production also missed expectations, expanding by 4.9% YoY.
Trade data told a similar story: the surplus narrowed from $103.33bn to $90.45bn in September. Still, inflation gave a small upside surprise after headline CPI rebounded to 0.2% YoY on holiday spending, beating forecasts and reversing September’s 0.3% drop. Core CPI also firmed to 1.2%, matching its February high.
Meanwhile, the People’s Bank of China (PBoC) kept its Loan Prime Rates (LPR) unchanged in October: 3.00% for the one-year and 3.50% for the five-year, exactly as markets expected. The November 20 decision is likely to be another steady-as-she-goes event.
RBA: Taking a wait-and-see approach
The Reserve Bank of Australia (RBA) left interest rates at 3.60% for the second straight meeting in early November, which didn’t surprise anyone. The messaging was calm and balanced, with no rush to shift policy in either direction.
The RBA noted that inflation is still a bit sticky and the labour market remains fairly tight, despite the slight uptick in unemployment. Governor Michele Bullock described policy as “pretty close to neutral,” suggesting there’s little appetite for either hikes or cuts right now.
She also pointed out that the 75 basis points of easing already delivered haven’t fully worked their way through the economy. Policymakers want to see how demand evolves before deciding what comes next.
Markets are aligned with that view: There’s almost a 90% chance the RBA stays on hold at the December 9 event, and pricing further out suggests just under 10 basis points of easing by the end of 2026.
The RBA Minutes from the November meeting added more colour to their thinking. That said, policymakers outlined three situations that would argue for keeping rates steady: A stronger-than-expected rebound in demand, inflation staying sticky or productivity lagging, or the Board deciding that policy is still slightly restrictive.
They also flagged two conditions that could justify more rate cuts: A meaningful softening in the labour market or households becoming noticeably more cautious with spending.
Technical picture
There are no changes to the consolidative theme surrounding AUD/USD for now. Looking at the broader picture, as long as the pair trades above its critical 200-day SMA, there should be scope for further gains.
The loss of the 200-day SMA at 0.6456 could open the door to a potential visit to the October floor at 0.6440 (October 14), prior to the August valley at 0.6414 (August 21) and the June base of 0.6372 (June 23).
In the opposite direction, minor hurdles line up at the November high at 0.6580 (November 13) and the October peak of 0.6629 (October 1). Once spot clears the latter, it could prompt a test of the 2025 ceiling of 0.6707 (September 17) to emerge on the horizon. Further up comes the 2024 top at 0.6942 (September 30), closely followed by the 0.7000 round level.
In addition, momentum indicators point to some loss of impulse: The Relative Strength Index (RSI) manages to rebound to nearly the 47 level, while the Average Directional Index (ADX) just above 12 signals a weak trend for now.
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Bottom line
AUD/USD is still stuck in its usual 0.6400–0.6700 range. It’ll probably take a proper catalyst to break out of it: Stronger Chinese data, a meaningful shift from the Fed, a change of tone from the RBA, or a broader improvement in US–China sentiment.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
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Author
Pablo Piovano
FXStreet
Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.
