The Australian Dollar (AUD) adds to Tuesday’s decent gains, with AUD/USD advancing to just pips away from the key 0.6600 barrier for the first time since late October on Wednesday.
The Aussie’s robust performance comes amid further weakness hurting the US Dollar (USD) as bets for further easing by the Federal Reserve (Fed) continue to pile up ahead of the December 10 event.
A steady grind higher
Australia’s economy isn’t offering up big surprises, and that’s kind of the point right now. The story is one of slow but steady progress. November PMIs helped settle nerves a bit, with Manufacturing returning to expansion at 51.6 and Services improving to 52.7.
Consumers continue to do their part: Retail Sales grew 4.3% YoY in September, and the trade surplus nudged wider to A$3.938 billion. Business investment did drop in Q3 (-0.9% QoQ), but it looks more like a soft patch than the start of a downturn.
Yes, Q3 growth undershot expectations: Real GDP was up 0.4% QoQ versus 0.7% in Q2 and below both market forecasts and the RBA’s projection, but the details tell a calmer story. Year-over-year growth is holding at 2.1%, almost bang-on where the Reserve Bank of Australia (RBA) expects things to end the year. In other words, capacity pressures haven’t disappeared.
The labour market still has some strength as well: The Unemployment Rate slipped to 4.3% in October, with Employment up a solid 42.2K.
The thorn in the RBA’s side is inflation. October CPI accelerated to 3.8% YoY, the hottest in roughly 17 months, with housing, food and recreation keeping price pressures sticky. Trimmed mean CPI, the RBA’s preferred gauge, also surprised on the high side at 3.3% YoY. That release carried extra weight as the first full monthly CPI since the Australian Bureau of Statistics (ABS) shifted away from quarterly reporting.
A helpful China, but not a powerful one
China remains a key support for Australia, just not the growth engine it used to be. Q3 GDP came in at 4.0% YoY, while Retail Sales rose 2.9% YoY in October.
But momentum elsewhere is softening. November PMIs highlight that slowdown: the official NBS Manufacturing PMI ticked up to 49.2 but stayed below 50 for an eighth straight month. RatingDog’s more private-sector-focused survey fell to 49.9, its first contraction in four months.
The distinction matters: NBS leans toward larger, state-owned firms; RatingDog captures more of the private, export-driven side of the economy.
The services picture isn’t much brighter. The official non-manufacturing PMI slipped back below 50 for the first time since China’s messy exit from Zero-Covid in late 2022, landing at 49.5, while RatingDog’s Services PMI also softened, hitting a five-month low at 52.1.
Trade data point to uneven demand too after the surplus narrowed slightly in September to $90.07 billion from $90.53 billion.
There was a small silver lining: Headline CPI returned to positive territory at 0.2% YoY, helped by Golden Week tourism, while the Core CPI also firmed to 1.2% YoY.
Still, the People’s Bank of China (PBoC) isn’t rushing to stimulate. Loan Prime Rates (LPR) remain unchanged at 3.00% (one-year) and 3.50% (five-year). So China is helping the Australian Dollar (AUD), just not enough to drive it sharply higher on its own.
Policy: hands on the wheel, but steady
The RBA kept the Official Cash Rate (OCR) at 3.60% in early November, exactly as expected. The message from Governor Michele Bullock is consistent: Inflation remains sticky, the labour market is still tight, and policy is “close to neutral”. They just need time for previous hikes to do their job.
Markets agree. Pricing suggests almost no chance of a move at the December 9 meeting, and only around 25 basis points of further tightening are priced all the way to end-2026, a huge contrast with expectations for roughly 88 basis points of Fed easing over the same period.
The November Minutes reinforced that stance: Patience for now, and if household spending or employment cracks down the road, cuts will be the next move.
Technical landscape
AUD/USD keeps its bullish prospect well in place, coming closer to the 0.6600 barrier and reinforcing the idea that extra gains remain in the pipeline in the near term.
Once the 0.6600 barrier is cleared, the pair could then head toward the October peak of 0.6629 (October 1), ahead of the 2025 ceiling of 0.6707 (September 17).
In the opposite direction, bears face provisional contention at the 55-day and 100-day SMAs in the 0.6530-0.6535 band. Below that region, spot risks a deeper drop to the significant 200-day SMA at 0.6466 prior to the November floor at 0.6421 (November 21). South from here sits the October base at 0.6440 (October 14), seconded by the August trough at 0.6414 (August 21), all preceding the June valley of 0.6372 (June 23).
Furthermore, momentum indicators point to extra advances in the short-term horizon: The Relative Strength Index (RSI) advances past the 63 level, while the Average Directional Index (ADX) near the 16 mark suggests that the current trend appears to be regaining impetus.
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What does that mean for AUD/USD?
The Aussie isn’t preparing for a breakout, not just yet. It’s still very responsive to swings in risk sentiment and whatever comes out of China. A break below 0.6400 would turn the outlook more negative.
For now though, a softer US Dollar, steady (if unspectacular) domestic data and a bit of support from China are keeping the uptrend alive. Gains from here are likely to be gradual and hard-won, but the bias remains upward.
