The Australian dollar (AUD) gained ground against the US dollar (USD) on Monday, marking its second consecutive day of increases. The AUD/USD exchange rate was bolstered by cautious remarks from Andrew Hauser, the Deputy Governor of the Reserve Bank of Australia (RBA). He pointed out the significant hurdles currently facing monetary policy and stressed the importance of maintaining stringent conditions to manage inflation.
Hauser remarked that Australia’s monetary policy is in a challenging position. The economy is recovering, with demand outpacing potential output, which leaves little leeway for easing in the short term. He noted that demand is “slightly” higher than its potential, and GDP growth has picked up—pointing to the toughest recovery since the early 1980s, but with limited room for growth unless inflationary pressures resurface.
The Australian dollar also benefited from a reduction in trade tensions between the US and China. China’s Ministry of Commerce announced a temporary lift on export approval bans to the US regarding “dual-use items” like gallium, germanium, antimony, and carbide materials. This suspension will last from Sunday until November 27, 2026. Given that China is a key trading partner for Australia, shifts in the Chinese economy could directly affect the Australian dollar.
In October, China’s consumer price index (CPI) rose by 0.2% year-on-year, recovering from a 0.3% drop in September, with market expectations at zero growth. The month-on-month CPI increase was 0.2%, compared to a 0.1% rise last year. Meanwhile, the Producer Price Index (PPI) fell by 2.1% year-on-year in October, a slightly better outcome than the anticipated 2.2% decrease.
USD Remains Steady Amid Potential Government Shutdown Resolution
- The US dollar index (DXY), which gauges the USD against a basket of six major currencies, is stable, trading close to 99.60. The dollar remained mostly unchanged following a Bloomberg report indicating that a faction of centrist Senate Democrats has reached an agreement to enable government operations to resume and fund various departments into the next year.
- This agreement ensures federal workers receive back pay and allows states to restart delayed federal funds. Some sectors are set to receive funding until January 30, while others will secure full-year allocations.
- U.S. Treasury Secretary Scott Bessent warned Monday that the repercussions from the federal government shutdown are worsening. He mentioned that inflation is taking a significant toll and anticipates a decline in prices in the near future.
- The University of Michigan reported that its consumer confidence index dropped to 50.3 in November, the lowest since June 2022 and down from 53.6 in October, falling short of expectations of 53.2. Consumer sentiment is at its lowest in three and a half years, largely due to worries about the government shutdown.
- According to the Challenger Layoffs Report, over 153,000 jobs were cut in October—the largest monthly decline for this time of year in more than two decades.
- In positive news, the ADP employment report showed an increase of 42,000 jobs in October, a rebound from September’s revised loss of 29,000. This result surpassed the estimated increase of 25,000. The US ISM Services PMI for October stood at 52.4, up from 50.0 and higher than the expected 50.8.
- China’s trade balance in October was 640.4 billion yuan, down slightly from 645.47 billion yuan previously. Exports fell by 0.8% year-on-year in October, an improvement from the 8.4% drop in September, while imports rose by 1.4% year-on-year during this period, up from a 7.5% increase previously. In USD terms, China’s trade surplus was lower than expected, hitting +9.007 billion compared to the anticipated +9.56 billion and +90.45 in earlier forecasts.
- The China Rated Dog Services PMI for October was 52.6, matching market expectations, though down from 52.9 in September. The manufacturing PMI fell to 50.6 from 51.2, while the market had estimated a figure of 50.9.
- Australia’s trade surplus widened to $3.938 billion in September, surpassing the prior estimate of $3.85 billion and a revision upward from $1.825 billion. Exports increased by 7.9% month-on-month, a significant rebound from the previous 8.7% drop, while imports rose by 1.1%, compared to a previous increase of 3.2%.
Australian Dollar Aims for 50-day EMA Near 0.6550
AUD/USD is trading around 0.6520 as of Monday. Technical analysis suggests the pair is consolidating in a rectangular pattern and moving sideways. Currently, it sits just above the 9-day exponential moving average (EMA), indicating a solid short-term momentum.
The first barrier to overcome is the 50-day EMA at 0.6535. If there’s a breakthrough above this, we could see improved medium-term price momentum that supports the AUD/USD pair in exploring the upper rectangle area at 0.6630. Further progress might even bring it nearer to the 13-month high of 0.6707, recorded on September 17.
If the AUD/USD pair dips, immediate support may be found at the psychological level of 0.6500, followed by potential support around 0.6470 and the five-month low of 0.6414 logged on August 21. Additional support could emerge at the six-month low of 0.6372.
