The Australian Dollar (AUD) edged lower against the US Dollar (USD) on Wednesday after two days of gains, though downside pressure remains limited. Rising expectations of multiple Federal Reserve (Fed) rate cuts could weigh on the greenback and help support AUD/USD.
US Data and Fed Outlook
US Retail Sales rose 0.6% month-on-month in August, matching July’s upwardly revised figure and beating the 0.2% forecast. Core measures also printed stronger than expected, pointing to resilient consumer spending despite high inflation and labor market softness.
Markets are fully pricing in a 25 basis-point Fed rate cut on Wednesday, the first since December 2024, with some traders eyeing the possibility of a larger 50 bps move. The “dot plot” in the Fed’s Summary of Economic Projections will be closely watched for clues on the policy path.
Morgan Stanley and Deutsche Bank both expect three cuts this year—September, October, and December—citing easing inflation pressures and weakening jobs data.
Global and Domestic Developments
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China: August retail sales grew 3.4% year-on-year, below forecasts, while industrial output also missed expectations. The NBS said the economy remains steady but faces external headwinds.
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Australia: RBA Assistant Governor Sarah Hunter said inflation is “close to target” and risks are balanced. Market swaps now price in an 86% chance of steady policy in September, supported by strong GDP, trade surplus, and hotter July inflation.
Technical Outlook
AUD/USD is trading near 0.6670, just below the 11-month high of 0.6689. The pair remains inside an ascending channel and above the 9-day EMA at 0.6634, reinforcing the bullish bias.
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Upside targets: 0.6700 (psychological barrier) and 0.6710 (channel top).
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Supports: 0.6634 (9-day EMA), 0.6570 (channel base), and 0.6541 (50-day EMA).
A sustained break above 0.6700 would strengthen the bullish case, while a drop below the channel base could signal fading momentum.
