The Australian Dollar has cut down its daily losses after careful comments from Reserve Bank of Australia (RBA) Governor Michele Bullock. The RBA kept the Official Cash Rate steady at 3.6% during the November meeting. This comes as the US Dollar gains strength due to lower expectations for a Federal Reserve (Fed) rate cut in December. In October, the TD-MI Inflation Gauge rose by 0.3% month-on-month, while annual inflation reached 3.1%. Building Permits increased by 12.0% month-on-month, surpassing the market forecast of 5.5%. However, ANZ Job Advertisements fell by 2.2% in October, marking a fourth month of decline.

US Dollar Index

The US Dollar Index is trading around 100.00, supported by caution regarding the Fed’s December policies. Fed funds traders now see a 65% chance of a rate cut in December, with the Manufacturing PMI dipping to 48.7, below market expectations. The AUD/USD pair trades around 0.6530, suggesting a consolidation phase. Support is set at 0.6500, while immediate resistance is at 0.6540. If bullish momentum builds, the pair could move toward 0.6600, and a break above that could lead to a rise toward a 13-month high. The Reserve Bank of Australia is holding its cash rate at 3.6%, indicating that policymakers have already made several cuts from the previous peak of 4.35% seen in late 2023. This pause, along with fading expectations for a December Fed rate cut, suggests the AUD/USD pair will continue to consolidate. Traders should be ready for choppy, sideways conditions instead of a clear trend in the coming weeks. The Australian economy presents a mixed picture, supporting a neutral outlook. We are closely monitoring inflation data, as the annual rate of 3.1% remains stubbornly above the RBA’s target band, limiting the possibility of further rate cuts. However, the consistent drop in job advertisements over four consecutive months indicates a cooling labor market, complicating any chances for future rate hikes.

US Government Shutdown

In the United States, the ongoing government shutdown, which is now in its sixth week, adds uncertainty that could impact the US Dollar. Historical data from the long shutdown in 2018-2019 showed a decline in quarterly GDP growth, a trend that could pressure the Fed. This risk may restrain substantial strength in the US Dollar, maintaining the sideways outlook for currency pairs like AUD/USD. Additionally, the Australian Dollar is sensitive to China’s economic health, especially with China’s Manufacturing PMI falling to 50.6. As of the third quarter of 2025, China remains Australia’s largest trading partner, responsible for over 30% of its exports. Any further economic slowdown in China, particularly in construction and manufacturing, will directly affect the Aussie dollar. Considering all of this, the AUD/USD pair is trading between support at 0.6500 and resistance near 0.6600. Implied volatility might remain somewhat high due to US political risks, but the steady stance of both central banks should keep it in check. This situation is increasingly advantageous for option sellers, who can explore strategies to benefit from time decay and a lack of price movement, such as selling strangles or iron condors outside of this expected range. Create your live VT Markets account and start trading now.

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