Insights 
VT 
The Australian Dollar has trimmed its daily losses after cautious remarks from the Reserve Bank of Australia’s (RBA) Governor Michele Bullock. The RBA maintained the Official Cash Rate at 3.6% during the November meeting, with US Dollar gains as expectations for a December Federal Reserve (Fed) rate cut decrease.
The TD-MI Inflation Gauge rose 0.3% month-on-month in October, while annual inflation was 3.1%. Building Permits data increased by 12.0% month-on-month, against a market expectation of 5.5%, but ANZ Job Advertisements dropped 2.2% in October, marking a fourth month of decline.
Us Dollar Index
The US Dollar Index is trading around 100.00, supported by cautious sentiment around the Fed’s December policy. Fed funds traders now estimate a 65% chance of a December rate cut, with the Manufacturing PMI falling to 48.7, below market expectations.
The AUD/USD is trading around 0.6530, suggesting a consolidation period. Support is at 0.6500, with immediate resistance found at 0.6540. Hints of bullish momentum could push the pair towards 0.6600, with a break above potentially leading to a climb toward the 13-month high.
We see the Reserve Bank of Australia holding its cash rate at 3.6%, a level that suggests policymakers have already enacted several cuts from the 4.35% peak we saw back in late 2023. This pause, combined with fading expectations for a December US Federal Reserve rate cut, points toward a period of consolidation for the AUD/USD pair. Derivative traders should prepare for choppy, range-bound conditions rather than a strong directional trend in the coming weeks.
The domestic Australian economic picture is mixed, which supports a neutral stance. We are watching inflation data closely, as the annual rate of 3.1% remains stubbornly above the RBA’s target band, limiting the chance of further rate cuts. However, the fourth consecutive monthly decline in job advertisements signals a cooling labor market, complicating any potential move to hike rates again.
Us Government Shutdown
In the United States, the ongoing government shutdown, now in its sixth week, is a major source of uncertainty that could weigh on the US Dollar. Historical data from the lengthy 2018-2019 shutdown showed a direct reduction in quarterly GDP growth, a precedent we cannot ignore as it could increase pressure on the Fed. This risk may limit significant US Dollar strength, reinforcing the range-bound outlook for currency pairs like AUD/USD.
The Australian Dollar’s sensitivity to China also warrants caution, especially with China’s Manufacturing PMI declining to 50.6. As of the third quarter of 2025, we know that China remains Australia’s largest trading partner, accounting for over 30% of its exports. Any further economic weakness in China, particularly in construction and manufacturing, will directly pressure the Aussie dollar.
Given this backdrop, the AUD/USD pair is pinned between support at 0.6500 and resistance near 0.6600. Implied volatility may remain somewhat elevated due to the US political risks, but the on-hold stance from both central banks should keep it contained. This environment is becoming increasingly favorable for option sellers to consider strategies that profit from time decay and a lack of movement, such as selling strangles or iron condors outside of this expected range.
