• The AUD/USD outlook remains constructive as the US dollar weakens ahead of the Fed rate cut.
• Hawkish RBA and China’s trade surplus keep Aussies supported.
• Technical correction could be seen before the bullish continuation.

The AUD/USD price starts the fresh week with a tight bullish consolidation, holding near Friday’s highs around mid-0.6600. The traders are digesting dollar weakness with supportive domestic and Chinese trade data.

The Dollar Index (DXY) remains under pressure, trading below the 99.00 level, as markets increase bets on Fed rate cuts this Wednesday. According to the CME FedWatch Tool, market participants are pricing in a probability of around 90% for a rate cut in December, compared to 70% last week. The cooling inflation and deteriorated economic indicators have strengthened the case for easing policy.

Despite the dollar’s weakness, traders remain focused on Fed Chair Powell’s press conference as any hawkish tone could offset the dollar’s bearish momentum. The Friday’s UoM Consumer Sentiment Index showed a rise to 53.3, pausing the dollar’s decline but not enough to alter the AUD/USD trend.

The Australian side shows a constructive perspective as the RBA is expected to hold rates in Tuesday’s meeting. However, speculation of a rate hike in 2026 amid the RBA Governor’s concerns about unstable inflation keeps the Aussie’s long-term view supported. Meanwhile, strong GDP and labor data have increased the odds of a rate hike, which diverges from the Fed’s dovish stance, widening AU-USD yield spreads.

Australia’s 10-year yields climbed to 4.741%, the highest level since November 2023, pushing the premium 60 points over US Treasuries, the largest since August 2022. Meanwhile, option markets also indicate steady AUD demand, as risk reversal shows call-side interest, while traders favor dip-buying ahead of the RBA and FOMC.

On the other hand, China’s recent trade data lifted the Aussie further, with exports rising to 5.7% YoY and USD-denominated trade surplus reaching $111.68 billion. The AUD/USD found mild traction after the data.
 

AUD/USD Key Events

The following key events could influence the AUD/USD pricing:

• RBA Cash Rate Decision (Tuesday)
• FOMC Interest Rate Decision (Wednesday)
• Australian Employment (Thursday)

The Australian jobs report, due to be released on Thursday, is expected to show a 20,000 rise in employment, with unemployment rising slightly to 4.4%. Meanwhile, the crucial RBA meeting on Tuesday and Fed meeting on Wednesday could trigger volatility in the pair.

AUD/USD Technical Outlook: Overbought Aussie Could Pull Back
 

(Click on image to enlarge)

AUD/USD 4-hour chart
 

The AUD/USD rally could pause after gaining for consecutive sessions as the RSI hits the overbought region on the 4-hour chart. However, the pair stays comfortable above the 20-period MA. A potential pullback to orderblock and 20-period MA near 0.6600 could be seen before further upside continuation towards 0.6700.

Conversely, breaking below the 0.6600 level could spark selling to the 50-period MA around 0.6570, ahead of the 100-period and 200-period MAs confluence at 0.6530.

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