Fundamental Overview
The USD came under some pressure on Friday as the risk-off sentiment caused by Trump’s threat of substantially increasing tariffs on China weighed on Treasury yields. Over the weekend, we had more soothing comments from Trump and other US officials which triggered a recovery in risk sentiment.
The positive mood is weighing a bit on the greenback amid lack of bullish catalysts. Domestically, nothing has changed for the US dollar as the US government shutdown continues to delay many key US economic reports. The dollar “repricing trade” needs strong US data to keep going, especially on the labour market side, so any hiccup on that front is likely to keep weighing on the greenback.
The market pricing shifted more dovish with 47 bps of easing by year-end and 115 bps cumulatively by the end of 2026. The BLS announced last week that it will release the US CPI report despite the shutdown on October 24, so that’s going to be a key risk event. In case we get hot data, we will likely see a hawkish repricing in interest rates expectations with the December cut being priced out. Conversely, a soft report shouldn’t change much in terms of pricing, but it will likely weigh on the greenback anyway.
On the AUD side, the commodity currency sold off aggressively across the board on Friday following Trump’s tariffs threat on China. Given the close link between China and Australia on the trade side, the market increased the dovish bets on the RBA given the new risk. Today, the AUD bounced back strongly given the soothing comments from Trump and other US officials during the weekend.
On the monetary policy side, nothing has changed as we continue to wait for the next employment and quarterly inflation report. The RBA kept everything unchanged at the last meeting with RBA Governor Bullock not offering much in terms of forward guidance other than the usual data dependency and meeting by meeting approach to interest rate decisions.
AUDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that AUDUSD broke below the recent low at 0.6520 and extended the drop into the 0.6472 level before bouncing back above the 0.6520 level again today. From a risk management perspective, the sellers will have a better risk to reward setup around the trendline to position for a drop into the 0.6350 level. The buyers, on the other hand, will want to see the price breaking above the trendline to open the door for a rally into the 0.67 handle next.
AUDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is now consolidating around the 0.6520 level. This is where we can expect the sellers to step in with a defined risk above the most recent high to position for a drop back into the 0.6471 low. The buyers, on the other hand, will likely pile in around this level to extend the pullback into the major trendline.
AUDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is now trading below the 0.6520 level. The sellers will likely pile in here with a defined risk above the high to keep pushing into new lows, while the buyers will want to see the price rising back above the level to start targeting new highs. The red lines define the average daily range for today.
Upcoming Catalysts
This week is going to be very light again in terms of data releases given the US government shutdown. Data like Retail Sales and Jobless Claims won’t be released. We will have lots of Fed speakers though with Fed Chair Powell scheduled for tomorrow. Given the lack of key US data though, it’s very unlikely to see a change in stance. On Thursday, we also get the Australian employment report. For now, we know that only the US CPI will be published despite the shutdown, which is scheduled for Friday October 24.
