Turning the focus to the AUD/USD pair, a US-Aussie trade deal and easing US-China trade tensions failed to boost demand for the Aussie dollar. Recent Aussie economic data have revived bets on a November RBA rate cut, pushing the pair below $0.65.
Crucially, the unemployment rate unexpectedly increased from 4.3% in August to 4.5% in September.
A cooling labor market may soften wage growth and potentially curb consumer spending. A pullback in consumption could dampen demand-driven inflation, supporting a more dovish RBA rate path. Notably, AUD/USD tumbled below the $0.645 level before partially recovering on US-China headlines and upbeat Chinese economic data.
With China under the spotlight, traders should closely monitor updates from the ongoing Communist Party Fourth Plenum. Fresh policy measures to bolster China’s housing and labor market could lift demand for the Aussie dollar. On the other hand, silence on fresh stimulus ahead of the APEC Summit may leave AUD under pressure.
Looking ahead, with the labor market data lifting bets on a rate cut, next week’s inflation data for the third quarter will likely determine whether the RBA makes a monetary policy adjustment. The quarterly numbers are set for release on Wednesday, October 29.
Economists forecast the RBA Trimmed Mean CPI to rise 2.6% year-on-year in the third quarter, down from 2.7% in the second quarter. Easing inflationary pressures may cement bets on a November rate cut and fuel expectations of further rate cuts in early 2026.
US Government Shutdown, Trade Developments, and AUD/USD
AUD/USD was up 0.06% to $0.64915 in early trading on Wednesday, October 22. Hopes of a US-China trade deal and a potential boost in demand for Chinese goods continued to bolster support for the Aussie dollar.
Later on Wednesday, traders will continue to monitor developments on Capitol Hill and US-China trade-related chatter. US Treasury Secretary Scott Bessent is due to meet China’s Vice Premier He Lifeng to continue trade talks.
Progress toward a trade deal may send AUD/USD above its 200-day EMA. A sustained move through the 200-day EMA could bring the 50-day EMA and $0.6550 into play.
Conversely, stalled talks may push the pair toward $0.6450.
AUD/USD: Key Scenarios to Watch
Bearish AUD/USD Scenario: Dovish RBA comments or renewed trade tensions may push AUD/USD toward $0.6450. If breached, $0.6400 would be the next key support level.
Bullish AUD/USD Scenario: Hawkish RBA chatter and progress toward a US-China trade deal may send AUD/USD toward $0.6550.
