The Australian dollar extended a two-day recovery against the US dollar, with AUD/USD up more than 0.50% to 0.6980 as appetite for risk improved and Chinese data surprised to the upside. China’s GDP rose 4.5% year on year in Q3 2026, up from 4.3% previously, while September Retail Sales increased 1% after 0.4% and doubled forecasts of 0.5%. In the US, the US Dollar Index added 0.19% to 101.97, and money markets priced December Fed hike odds near 91%, with October seen as unchanged ahead of S&P Global Flash PMIs on October 22.
Geopolitical developments stayed in focus after the Houthis claimed six attacks on Saudi Arabia in the last 48 hours, while the US administration eased energy sanctions on Russia and reports pointed to a potential diplomatic breakthrough this week. Technically, AUD/USD remains capped below a 50-, 100- and 200-day SMA cluster around 0.7079, with RSI (14) near 45. Support is marked by an ascending trend-line near 0.6916 from 0.6833, while resistance levels sit at 0.7079, 0.7089 and 0.7198; below 0.6916, attention turns to 0.6358.
Cautious Approach to AUD/USD Momentum
We should approach the recent Australian dollar surge toward 0.7000 with calculated caution rather than blindly buying into the momentum. While China’s 4.5% annual economic growth beat forecasts and offers strong fundamental backing, the broader technical picture remains heavy. We recommend looking for fading opportunities near major overhead resistance levels as long as long-term moving averages remain unbroken.
Technical and Macro Risks Favor Caution
Technically, we see a dense cluster of simple moving averages near 0.7079 acting as a strong ceiling for upside strategies. With momentum indicators like the 14-day RSI hovering near 45, buying power appears to be weakening before testing these higher hurdles. A clean breakdown below the 0.6916 trendline support could quickly open the door for short trades targeting deeper structural lows.
Macro risks also heavily favor keeping position sizes manageable, especially given that markets are pricing in a 91% chance of a US central bank rate hike by December. Historically, rising interest rate expectations in the United States tend to limit prolonged upside for commodity-linked currencies. We should closely monitor upcoming flash manufacturing and services data on October 22 to confirm whether this bounce has real staying power or is simply a temporary counter-trend squeeze.
