• The AUD/USD outlook steadies as the US shutdown is balanced by downbeat domestic data.
• The RBA’s cautiousness and the Fed’s easing leave the AUD anchored.
• China’s weakness and domestic trade data could cap gains in Aussie.

The AUD/USD outlook remains stable amid subdued US dollar activity following the US government shutdown and softening labor market data. The pair is currently trading near 0.6620, 0.11% up on the day during the early European session. However, the price is in consolidation as the downbeat Australian trade balance data headwinds with US fundamentals.

The US shutdown has halted most official data releases, leaving markets to rely on ADP employment and ISM surveys for information. The September ADP data showed a net loss of 32,000 jobs, compared to the forecast of 51,000 gains. This indicates a sharp deceleration in hiring momentum, resulting in a notable steepening of US Treasury yields. The short-dated yields are leading the decline as markets are almost certain of a Fed rate cut in October. According to the CME FedWatch tool, the probabilities of back-to-back cuts in October and December are 99% and 76%, respectively.

On the domestic front, the Australian picture is less supportive, as the August trade surplus narrowed sharply to $ 1.83 billion AUD, well below the forecast of $ 6.5 billion AUD due to a slump in exports of 7.8% m/m. Gold shipment fell back while imports surged to 3.2%. It reveals softening external demand while China’s real estate sector troubles keep Australia vulnerable. The RBA also warned that China’s weakness, higher asset prices, and sovereign debt market stress could affect financial stability.

Earlier this week, the RBA kept rates steady at 3.6%, with Governor Bullock noting that the inflation component was higher, but price pressure was not spiraling out of control. This cautious tone suggests that the RBA will not follow the Fed’s aggressive rate-cut path, leaving the AUD somewhat anchored. Still, the UOB analysts highlight that the AUD/USD looks overstretched above 0.6600 and is likely to consolidate between 0.6545 and 0.6655 in the coming weeks.
 

Key Events to Watch Ahead:

The only key data release ahead is US jobless claims, but market participants will closely watch US politics and domestic drivers for fresh impetus.
 

AUD/USD Technical Outlook: Ranging Above Key MAs
 

(Click on image to enlarge)

AUD/USD 4-hour chart
 

The 4-hour chart for the AUD/USD shows consolidation above the 20-period MA, with immediate resistance of 0.6625 capping the gains. On a clear breakout of this level, the price could test the 0.6660 ahead of 17^th September highs of 0.6700. The RSI is above 50 but below the overbought zone, suggesting room for more upside.

Conversely, falling back below the 0.6600 mark could gather selling momentum and push the price to the demand zone around 0.6580, ahead of the 200-period MA at 0.6560.

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