The Australian Dollar (AUD) is gaining due to expectations that the Reserve Bank of Australia (RBA) will keep its current policies. Meanwhile, the US Dollar (USD) is strengthening as the chance of a Federal Reserve rate cut in December is decreasing. China’s Manufacturing PMI dropped to 50.6 in October, which might affect the AUD because of strong trade links. Australia’s Building Permits increased by 12.0% from last month, exceeding predictions. However, job ads fell by 2.2%. Traders are approaching the RBA’s upcoming meeting cautiously, expecting rates to stay the same after several cuts. The RBA’s decisions are guided by inflation data, including an annual rise of 3.1% in the Inflation Gauge and a Q3 CPI increase of 3.0% year-on-year. The US Dollar Index hovered around 99.80 as the odds of a Fed rate cut dropped from 93% to 69%. The ongoing US government shutdown and mixed views among Fed members about rate changes contribute to market uncertainty. China’s NBS PMI fell to 49.0, further impacting market views. The AUD/USD pair is around 0.6550, indicating a period of consolidation. If it exceeds 0.6600, it might signal a bullish trend, with support near 0.6544. Economic data from the US and China continues to play a role in shaping the AUD amidst RBA policy discussions. With the RBA’s policy decision coming tomorrow, the market anticipates over a 90% chance that rates will remain steady. This comes after data from the Australian Bureau of Statistics showed Q3 2025 inflation at 3.2% year-on-year, still above the RBA’s target range. The RBA may not ease policies until inflation trends closer to the 2-3% target. At the same time, the USD remains strong as hopes for a Federal Reserve rate cut have diminished. The CME FedWatch Tool shows the chance of a December 2025 cut has fallen below 25%, down from 69% just over a week ago. This change follows a robust US jobs report for October, which added 210,000 jobs, while core inflation remains around 3.5%. China continues to be a wildcard for the AUD, as its recent economic data has raised concerns. The latest Caixin Manufacturing PMI for October 2025 was 50.4, just avoiding contraction, but still showing a slowdown in factory activity. Ongoing weakness in this major trading partner could limit the AUD’s gains, even if the RBA keeps a firm stance. Given these mixed factors, selling volatility appears to be the safest strategy for the upcoming weeks. Using options, setting up an iron condor or a short strangle on AUD/USD with strike prices from 0.6450 to 0.6650 could be profitable. This strategy thrives on the pair staying in a range, which is likely as the strong Fed and poor Chinese data counterbalance the RBA’s position. From our viewpoint in late 2025, this situation echoes what we saw in 2023 when different central bank policies led to clear currency trends. Back then, the Fed’s aggressive rate increases pushed the USD higher against currencies from central banks that were more cautious. We are witnessing a similar scenario now, where interest rate expectations drive currency moves. For traders focused on futures or CFDs, the technical levels discussed are essential. A decisive break above the 0.6630 resistance level could indicate a good time to go long, targeting the 0.6700 area. On the other hand, if the price drops below the nine-day EMA around 0.6540, it could suggest momentum is weakening, leading to a test of the 0.6460 support level.

here to set up a live account on VT Markets now