- AUD/USD continues to lose ground for the third straight day amid a firmer US Dollar.
- Diminishing odds for a jumbo Fed rate cut and a softer risk tone underpin the buck.
- The RBA’s dovish outlook further weighs on the Aussie ahead of the FOMC Minutes.
The AUD/USD pair prolongs its weekly downtrend for the third straight day – also marking the fourth day of a negative move in the previous five – and drops to a three-week low on Wednesday. The US Dollar (USD) attracts some follow-through buying amid reduced bets for a more aggressive policy easing by the Federal Reserve (Fed), especially after last Thursday’s release of a hotter US Producer Price Index (PPI). In fact, the gauge rose in July at the fastest monthly pace since 2022 and indicated a gain of momentum in price pressures, tempering expectations for a jumbo 50 basis points Fed rate cut in September. This, along with a softer tone around the equity markets, lifts the safe-haven buck to an over a one-week top and drives flows away from the risk-sensitive Aussie.
The Australian Dollar (AUD) is further pressured by the Reserve Bank of Australia’s (RBA) dovish rate cut earlier this month. The central bank slashed its outlook for economic growth in 2025 to 1.7% from 2.1%, and marginally lowered GDP forecasts for 2026 and 2027, to 2% and 2.1%, respectively. Furthermore, RBA Governor Michele Bullock said that the updated forecasts imply cash rates might need to be lower for price stability and did not rule out back-to-back rate cuts. Market participants now see a high probability of another rate cut in November—possibly lowering the rate to around 3.35%—and some forecasts extend bets to two or three cuts by year-end. This overshadows a surge in Australia to its highest in nearly four years, which does little to support the AUD/USD pair.
On the geopolitical front, diplomatic efforts to end the protracted Russia-Ukraine war picked up pace this week. In fact, White House press secretary Karoline Leavitt said on Tuesday that plans for a bilateral meeting between Russian President Vladimir Putin and Ukrainian President Volodymyr Zelensky are underway. Meanwhile, Zelenskiy described a summit with US President Donald Trump, the EU, and UK leaders as a “major step forward” towards ending Europe’s deadliest conflict in 80 years. Russia, on the other hand, launched 270 drones and 10 missiles at Ukraine. Moreover, Trump ruled out deploying ground troops to Ukraine but suggested air support could be part of a deal to end the war in the region. This keeps geopolitical risks in play and favors the AUD/USD bears.
Traders now look forward to the release of the FOMC Minutes for some impetus later during the US session. Investors will also confront the release of flash global PMI prints on Thursday for clues on the economic momentum, which could influence the broader market risk sentiment and contribute to producing short-term trading opportunities around the AUD/USD pair on Thursday. The focus, however, will remain glued to Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium. Market participants will look for cues about the US central bank’s policy stance in order to determine the next leg of a directional move for the USD and the AUD/USD pair.
AUD/USD daily chart
Technical Outlook
Spot prices could find some support near the 0.6420-0.6400 congestion zone. This is closely followed by a technically significant 200-day Simple Moving Average (SMA), around the 0.6385 region, which, if broken decisively, would be seen as a fresh trigger for bearish traders and pave the way for deeper losses. Given that oscillators on the daily chart have been gaining negative traction and are still away from being in the oversold zone, the AUD/USD pair might then fall to an intermediate support near the 0.6355-0.6350 region before testing sub-0.6300 levels.
On the flip side, any meaningful recovery attempt might now confront an immediate strong hurdle near the 0.6480-0.6485 area. Some follow-through buying beyond the 0.6500 psychological mark might trigger a short-covering rally and lift the AUD/USD pair to the 0.6555-0.6560 supply zone. The latter should act as a key pivotal point, which, if cleared, will negate the negative outlook and pave the way for a move towards the 0.6600 round figure en route to the year-to-date high, around the 0.6625 region touched in July.
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