Australian Dollar Slips After Five-Day Rally as USD Finds Support

The Australian Dollar (AUD) cooled off on Tuesday, pausing its five-day winning streak against the US Dollar (USD). The pair retreated slightly toward 0.6550 as the Greenback staged a modest rebound ahead of key US economic data.

Fed Rate Cut Bets Remain Strong

Despite the upward correction in the USD, the market remains heavily tilted toward a Federal Reserve (Fed) rate cut in September. The CME FedWatch tool shows that traders are pricing in an 89% probability of a 25-basis-point cut, up from 84% last week. Investors now shift their focus to upcoming US employment reports, including ADP payrolls and Nonfarm Payrolls, which could be pivotal for the Fed’s policy path.

Australian Inflation Beats Expectations

On the domestic front, July’s inflation figures surprised to the upside, with the Monthly CPI rising 2.8% YoY, compared to June’s 1.9% and above forecasts of 2.3%. The hotter inflation data has reduced expectations of an immediate Reserve Bank of Australia (RBA) rate cut, lending some support to the Aussie.

China’s PMI Adds to Volatility

China, Australia’s largest trading partner, also remains a key factor for the Aussie. August’s Caixin Manufacturing PMI jumped to 50.5, crossing into expansion territory and boosting risk sentiment. However, the official PMI remained in contraction for the fifth consecutive month, highlighting mixed signals from Beijing’s economy.

Technical Outlook: AUD/USD Tests 0.6550 Resistance

The AUD/USD pair is currently trading near 0.6550. If buyers push above this level, the next resistance stands at 0.6568 (August high), followed by the nine-month peak at 0.6625 (July high). On the downside, immediate support lies at 0.6520 (9-day EMA), with a deeper correction targeting 0.6500–0.6414.

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✅ Key Takeaway:
The Aussie Dollar remains supported by strong domestic inflation and Chinese data but faces resistance from a recovering US Dollar. Traders will keep a close eye on US labor market numbers and the July PCE inflation report, both of which could shape near-term direction.

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