USD firms ahead of ADP, AUD/USD eyes key support near 0.6420

The dollar holds firm in early trade as investors reassess expectations for a December Fed rate cut. Following Chair Powell’s cautious tone last week and subsequent FOMC remarks, markets have scaled back rate-cut bets — now pricing in roughly 16 basis points of easing compared to 23 bps a week ago. That subtle but significant shift has lent the greenback near-term strength across the board.

Recent Fed commentary has struck a data-dependent tone, with even dovish members acknowledging December remains a “live meeting.” Lisa Cook and Mary Daly both suggested the committee should keep an “open mind,” signaling reduced conviction in an immediate easing path. This shift toward conditional policymaking, however, comes amid a data blackout driven by the ongoing government shutdown, magnifying the market impact of whatever releases do make it through — most notably tomorrow’s ADP employment report.

With the JOLTS report canceled, traders may see rangebound conditions today, awaiting clearer labor signals. Fed Governor Michelle Bowman’s remarks later in the day could also prove pivotal. Bowman, typically dovish, could reinforce the notion of caution — paradoxically prompting a modestly hawkish repricing and short-term USD support if she downplays near-term cuts.

Technical outlook: AUD/USD pressured, eyeing key support

The AUD/USD pair continues to lose momentum, reflecting both a stronger U.S. dollar and ongoing uncertainty surrounding China’s growth outlook. On the chart, the pair trades firmly within a descending channel, with lower highs and lower lows defining its recent structure.

Currently, AUD/USD is gravitating toward a horizontal support zone near 0.6420, a level that aligns closely with the channel’s lower boundary. This area has acted as a strong demand zone multiple times in recent months. A decisive break below it could open the door to a retest of the 0.6370–0.6350 range, while a rebound from this level could see a short-term corrective bounce back toward 0.6530–0.6560 resistance.

Momentum indicators (such as RSI) suggest downside pressure remains intact, but the setup hints at potential exhaustion if buyers step in at that key support zone.

Market takeaway

Heading into the ADP report, USD retains a tactical advantage amid fading rate-cut optimism and limited data flow. Still, with market expectations finely balanced, the greenback’s strength may hinge on upcoming employment numbers.

For AUD/USD, all eyes are on 0.6420 — a crucial technical pivot that could determine whether this downtrend extends or finds its footing. A weak ADP print could offer the Aussie temporary relief, but for now, the path of least resistance remains lower.