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Australian Dollar (AUD) declines against the US Dollar (USD) on Tuesday, continuing its winning streak for the fifth successive session. The AUD/USD pair weakens as the Australian dollar comes under pressure, with Australia’s 10-year bond yield climbing to around 4.35% amid persistent inflation concerns. Traders appear to be demanding higher returns to offset inflation risks after RBA Governor Michele Bullock, in her post-meeting press conference, stated that policymakers had not discussed rate cuts and emphasized that annual core inflation remaining above 3% is undesirable.

RBA Governor Michele Bullock emphasized the need for limited policy easing in the latest meeting, noting that the effects of previous rate cuts are still filtering through the economy. She added that policymakers discussed maintaining a cautious approach regarding the policy outlook. The Reserve Bank of Australia (RBA) decided to maintain the Official Cash Rate (OCR) at 3.6% in the November policy meeting.

Melbourne Institute reported on Monday that the TD-MI Inflation Gauge rose 0.3% month-on-month (MoM) in October, easing slightly from a 0.4% gain in September but marking the second consecutive monthly increase. Meanwhile, the annual Inflation Gauge rose 3.1%, edging higher from the previous 3.0%.

Australian Bureau of Statistics (ABS) released Building Permits data, which rose 12.0% MoM, after falling 3.6% in August and beating market expectations of a 5.5% growth. ANZ Job Advertisements fell 2.2% month-on-month in October, following a revised 3.5% drop in the previous month. This marked the fourth straight monthly decline.

US Dollar gains ground on cautious Fed outlook
 

• The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is extending its winning streak and trading around 99.80 at the time of writing. The Greenback receives support from the cautious sentiment surrounding the US Federal Reserve (Fed) policy stance for December.
• Fed funds futures traders are now pricing in a 65% chance of a cut in December, down from 94% a week ago, according to the CME FedWatch Tool.
• Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) dropped to 48.7 from 49.1 in September. This reading came in weaker than the market expectation of 49.5.
• Fed Chair Jerome Powell said last week during the post-meeting press conference that another rate cut in December is far from certain. Powell also cautioned that policymakers may need to take a wait-and-see approach until official data reporting resumes.
• The US Fed delivered a 25-basis-point rate cut last week, lowering its benchmark rate to a range of 3.75%–4.0% in a 10–2 vote. The decision was not unanimous, as Fed Governor Stephen Miran supported a larger 50-basis-point cut, while Kansas City Fed President Jeffrey Schmid voted to keep rates unchanged.
• Traders adopt caution due to the prolonged government shutdown, which could fuel economic concerns in the United States (US). The US government impasse has now entered its sixth week with no easy endgame in sight amid a deadlock in Congress on the Republican-backed funding bill.
• The White House announced that China will suspend extra export controls on rare earths and end probes into US semiconductor firms, in exchange for the US pausing some tariffs and canceling a planned 100% levy on Chinese exports.
• US President Donald Trump said he plans to block China from accessing Nvidia’s most advanced semiconductor technology, according to CBS News. His remarks could reignite US-China trade tensions, which had eased after his meeting with Chinese President Xi Jinping last Thursday during the APEC Summit in South Korea.
• China's RatingDog Manufacturing Purchasing Managers' Index (PMI) declined to 50.6 in October from 51.2 in September. The market forecast was for a 50.9 print. It is important to note that any shift in China’s economic conditions could also affect the Australian dollar (AUD), given the close trade ties between China and Australia.
• The RBA Trimmed Mean CPI for Q3 rose 1.0% and 3.0% on a quarterly and annual basis, respectively. Markets estimated an increase of 0.8% QoQ and 2.7% YoY in the quarter to September. The monthly Consumer Price Index jumped by 3.5% YoY in August, compared to the previous reading of a 3.0% increase. This figure came in hotter than the expectation of 3.1%.
• Australia’s hotter-than-expected Q3 inflation and August CPI data reduced expectations for near-term rate cuts by the Reserve Bank of Australia (RBA). RBA Governor Bullock noted that the labor market remains somewhat tight, despite the unexpected rise in the unemployment rate.

Australian Dollar remains below 0.6550 as price momentum weakens
 

The AUD/USD pair is trading around 0.6530 on Tuesday. Technical analysis of the daily chart indicates that the pair is in a consolidation phase, trading sideways within a rectangle pattern. The recent move below the nine-day Exponential Moving Average (EMA) signals a weakening of short-term price momentum.

The primary support appears at the psychological level of 0.6500. A break below this level will prompt the AUD/USD pair to navigate the region around the lower boundary of the rectangle around 0.6460, followed by the five-month low of 0.6414.

On the upside, the immediate barrier lies at the nine-day Exponential Moving Average (EMA) of 0.6540. Further advances would reinforce the short-term price momentum and support the AUD/USD pair to test the crucial level of 0.6600, followed by the rectangle’s upper boundary around 0.6630. A break above the rectangle would signal a bullish bias and support the pair in exploring the region around the 13-month high of 0.6707, recorded on September 17.

AUD/USD: Daily Chart
 

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