The Australian dollar (AUD) has continued to show weakness against the US dollar (USD) as of Tuesday, following losses from the previous day. The AUD/USD pair is experiencing decline after the Reserve Bank of Australia (RBA) released minutes from its November monetary policy meeting.
According to those minutes, RBA board members hinted at a more measured approach to policy, suggesting that the cash rate might remain unchanged for a longer period if upcoming data proves to be stronger than anticipated.
However, there could be a chance for the Australian dollar to recover as solid domestic employment figures raise expectations that the RBA might adopt a more careful approach. As of the latest figures from November 14, futures for the ASX 30-day interbank cash rate for December 2025 are trading at 96.41, indicating a 6% probability of a rate cut from 3.60% to 3.35% in the next RBA meeting.
USD gains traction amid declining Fed rate cut expectations
- At the time of writing, the US Dollar Index (DXY), which assesses the USD against six significant currencies, has been on a decline, currently around 99.50. Traders are anticipating disappointing U.S. economic data post-government reopening.
- Markets are now estimating a 43% likelihood that the Federal Reserve will reduce the benchmark overnight borrowing rate by 25 basis points (bps) in December, a decrease from the 62% chance forecasted a week ago, per the CME FedWatch tool.
- Kansas City Fed President Jeffrey Schmidt recently stated that monetary policy should focus on encouraging demand growth and remarked that the current Fed policy is “moderately restrictive” and appropriate.
- National Economic Council Director Kevin Hassett cautioned that some October data might be lost due to gaps in information collection during the shutdown. Preliminary reports hint at a cooling labor market and shifting consumer confidence, alongside ongoing inflation concerns.
- A funding bill signed by President Donald Trump last Thursday marked the end of the longest government shutdown in U.S. history, lasting 43 days.
- St. Louis Fed President Alberto Moussallem mentioned that interest rates are nearing neutral rather than restrictive, asserting that the U.S. economy remains robust but warned against overly lax policies.
- Minneapolis Fed President Neel Kashkari, addressing a research conference, mentioned that segments of the labor market seem to be under pressure while the economy presents mixed signals. He also noted inflation remains high at 3%.
- According to U.S. employment changes data released on Tuesday by Automatic Data Processing (ADP), an average of 11,250 jobs were lost weekly over the four weeks ending October 25. Additionally, October saw U.S. employers cut 153,074 jobs, significantly higher than the 55,597 cuts reported for the same month last year.
- Reuters indicated that U.S. Treasury Secretary Scott Bessent anticipates securing a critical rare earths agreement between the U.S. and China by Thanksgiving, expressing confidence that China will uphold its commitments following a recent meeting between Presidents Trump and Xi Jinping.
- In October, China’s retail sales grew 2.9% year-on-year, surpassing the expected 2.7%, although industrial production rose by 4.9% year-on-year, falling short of the forecast of 5.5%. Fixed asset investment, on the other hand, dipped by 1.7% year-to-date, which was below the anticipated -0.8% and September’s reading was also lower at -0.5%.
- RBA Deputy Governor Andrew Hauser mentioned last week that while monetary policy is expected to stay restrictive, the committee continues to evaluate the situation. He acknowledged that a shift to a less restrictive policy could significantly influence future decisions.
- The Australian Bureau of Statistics (ABS) reported an unemployment rate drop to 4.3% in October, down from 4.5% in September, defying market expectations of 4.4%. Additionally, October saw an employment increase of 42,000, up from 12,000 the previous year and considerably above the market’s estimate of 20,000.
- There was also a rise in full-time positions by 55,000 in October, up from 6,500 in the prior report. The participation rate held steady at 67%, though part-time employment decreased by 131,000 when compared to a rise of 63,000 in the previous month.
Australian dollar trades below 0.6500, nearing the rectangle’s lower boundary
The AUD/USD pair was trading approximately at 0.6490 on Tuesday. A look at the daily chart shows that the pair is consolidating within a rectangular range, indicating sideways movement. The price is resting below the 9-day exponential moving average (EMA), hinting at waning momentum.
Main support is located at the lower edge of the rectangle around 0.6470, followed by a five-month low of 0.6414 recorded on August 21.
There’s a potential for the AUD/USD pair to test a critical level at the 9-day EMA around 0.6514. If the pair manages to break through this point, it could improve short-term price momentum and reach the rectangle’s upper limit at approximately 0.6630.
