The Australian Dollar (AUD) is falling compared to the US Dollar (USD) despite a positive trade deal between the US and Australia. This deal, signed by US President Trump and Australian Prime Minister Albanese, involves a $8.5 billion commitment to critical minerals, with each country promising at least $1 billion for mining projects in six months. Meanwhile, the US Dollar is recovering from earlier losses, even as the federal government faces its third week of a shutdown. The Federal Reserve shows a 99% chance of interest rate cuts in October and December. The People’s Bank of China is keeping loan rates steady, while China’s GDP has increased by 4.8% year-over-year.

AUD/USD Technical Analysis

On Tuesday, AUD/USD is trading around 0.6510 with a bearish outlook in technical charts. The pair is encountering resistance at several critical technical levels. The Australian Dollar is particularly weak against the USD, with a strong focus on economic indicators and market sentiment. The AUD is influenced by several factors, including RBA interest rates, iron ore prices, China’s economic health, and Australia’s trade balance. High interest rates, strong growth in China, and trade surpluses benefit the AUD. In contrast, economic issues in these areas hurt it. Currently, the Australian Dollar shows marked weakness against the US Dollar. This trend is likely to continue in the short term. A promising US-Australia minerals deal is overshadowed by immediate concerns, particularly the expected interest rate cut by the Reserve Bank of Australia next month. Traders should prepare for further declines in the Aussie, especially since Australia’s unemployment rate unexpectedly increased to 4.5% in September 2025—the highest in nearly four years. This situation reflects past trends where rising unemployment led to RBA rate cuts and a weakening AUD. With the market factoring in a November rate cut, any short-term rises in the AUD/USD pair could present good selling opportunities.

US Dollar Strength

Conversely, the US Dollar is showing unusual strength despite the government shutdown and the Federal Reserve’s plans for rate cuts in October and December. The US Dollar Index remains steady at approximately 98.70, indicating that its safe-haven appeal is greater than domestic political challenges. This stability suggests that, even with anticipated Fed easing, the US economy is viewed more favorably than others. The economic situation in China, Australia’s largest trading partner, adds to uncertainty and pressures the AUD. While recent Chinese data showed some positive signs, the ongoing slowdown in year-over-year GDP growth presents challenges. The AUD is particularly sensitive to these developments, especially given the volatility of iron ore prices—a major Australian export—due to concerns over Chinese demand in 2024 and 2025. Given this context, there are opportunities to bet on a declining AUD/USD exchange rate in the upcoming weeks. Derivative traders might consider buying put options on the AUD/USD pair or taking short positions in AUD futures contracts. The technical analysis supports this bearish outlook, with the next key support levels for the pair around 0.6414 and possibly even lower at 0.6372. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now