Insights 
VT 
The Australian Dollar is under pressure, trading around 0.6490 against the US Dollar. This decline comes as the possibility of a rate cut by the Reserve Bank of Australia grows, with employment data pushing the jobless rate up to its highest in nearly four years. The likelihood of a 25-basis-point rate cut has increased to 70% from 40% within a week. Market participants are closely monitoring economic indicators for clues on future monetary policy decisions.
Meanwhile, the US Dollar is strengthening, supported by President Trump’s anticipation of agreements with China’s Xi Jinping. The US Dollar Index is near 99.00, bolstered by positive market sentiment. However, the long US government shutdown, now in its fourth week, casts uncertainty on future economic data releases like Nonfarm Payrolls. A Reuters poll suggests a near-unanimous forecast for a 25-basis-point interest rate cut by the Federal Reserve this month, with an almost 97% probability of such an action in October. The People’s Bank of China has maintained its Loan Prime Rates, amid GDP growth figures that slightly exceeded expectations, and Retail Sales and Industrial Production figures that showed better-than-expected gains.
Reserve Bank Of Australia Rate Cut Likelihood
Given the high likelihood of a Reserve Bank of Australia rate cut, we should anticipate further weakness in the Australian dollar. The latest Australian Bureau of Statistics labour force data confirmed a jump in the unemployment rate to a four-year high, pushing market pricing for a November RBA cut to over 70%, as seen on the ASX 30 Day Interbank Cash Rate Futures tracker. This fundamental pressure suggests that any strength in the AUD will be temporary.
The positive developments, such as the US-Australia critical minerals agreement and stable data from China, are providing a soft floor for the currency but are not strong enough to reverse the trend. China’s Q3 GDP growth of 4.8% shows a slowdown from the previous quarter, which tempers enthusiasm despite recent beats in industrial production. For now, these factors simply prevent a complete collapse rather than signaling a recovery.
The US Dollar’s strength is also complicated by the Federal Reserve’s dovish stance, with the CME FedWatch Tool indicating a 97% probability of a rate cut on October 29. This is supported by recent data, like the ISM Manufacturing PMI for September which dipped further into contraction territory at 48.5. This makes the AUD/USD trade a story of relative weakness, where the RBA is currently perceived as having more reason to act decisively than the Fed.
Options Trading Strategy
For traders using options, the elevated uncertainty ahead of next week’s Australian Q3 CPI and the Fed meeting suggests buying AUD/USD put options is a prudent strategy. This allows us to profit from a potential downward move toward the 0.6400 level while capping our maximum loss. If the CPI data comes in softer than expected, it will likely accelerate the Aussie’s decline.
From a technical standpoint, the pair remains in a clear descending channel, making any rally towards the 0.6500-0.6540 resistance zone an opportunity to initiate short positions. We have seen significant buying interest near the 0.6400 handle in the past, making it a logical first target for taking profits on bearish trades. A decisive break below this level would open the door to fresh five-month lows.
