Insights 
VT 
The Australian Dollar gained ground against the US Dollar after Australia’s Consumer Inflation Expectations for October rose to 4.8%, the highest since June. The Reserve Bank of Australia is expected to maintain interest rates, having kept the Official Cash Rate unchanged at 3.6% in September amidst persistent inflation.
The US Dollar weakened as the government shutdown persisted with no resolution in sight. The US Dollar Index (DXY) halted a three-day winning streak, with markets pricing a 92.5% chance of a Federal Reserve rate cut in October. This is further influenced by Federal Open Market Committee Minutes suggesting a tendency toward more rate cuts.
Aud Usd Trading Patterns
The AUD/USD pair traded around 0.6600, remaining within the ascending channel. Technical analysis suggested potential testing of the upper boundary around 0.6800 while maintaining support at 0.6594. Meanwhile, Australia’s private house approvals fell by 2.6% in August, and Westpac Consumer Confidence dipped by 3.5% in October.
Interest rates impact currency strength and the price of gold, with higher rates attracting currency investment but lowering gold prices due to opportunity costs. The Fed funds rate influences US banks’ lending rates and market behaviour, tracked by the CME FedWatch Tool.
Given today is October 9, 2025, the widening gap between US and Australian monetary policy suggests a clear path forward. The Australian dollar is gaining strength because our own inflation expectations are rising, sitting at 4.8%, while the US dollar is weakening on the high probability of Federal Reserve rate cuts. This policy divergence is the central theme we should be trading on in the coming weeks.
We are seeing this divergence backed by hard data. Looking back, we remember the Reserve Bank of Australia was forced to hold its cash rate at a restrictive 4.35% for much of 2024 and 2025 due to persistent services inflation, which the latest monthly CPI indicator for August 2025 confirmed is still at 3.9%. In contrast, the US is showing clear signs of cooling, with the most recent September Non-Farm Payrolls report revealing job growth of only 150,000 and the unemployment rate ticking up to 4.2%.
Strategic Trading Recommendations
The ongoing US government shutdown, now in its ninth day, is further pressuring the US dollar by creating economic uncertainty, similar to the stalemates we saw back in late 2023. This reinforces the market view, reflected in the CME FedWatch Tool, that Fed rate cuts are almost certain before the year ends. Therefore, the path of least resistance for the AUD/USD pair appears to be upward.
For derivative traders, this outlook supports establishing bullish positions on the AUD/USD. We should consider buying call options with strike prices above the current 0.6600 level, anticipating a move toward the 12-month high near 0.6707. Selling cash-secured put options with a strike price near the key support level around 0.6560 could also be a viable strategy to collect premium while expressing a bullish-to-neutral view.
The technicals align with this fundamental view, as the pair remains in an ascending channel. A break above the 0.6707 resistance would signal further strength, potentially targeting the 0.6800 handle in the following weeks. We should use the nine-day EMA around 0.6594 as a near-term guide for placing stops on any long positions.
However, we must remain aware of the risks, particularly from China, Australia’s largest trading partner. Recent data showed China’s Q3 2025 GDP growth missed expectations, coming in at 4.8%, which could soften demand for Australian commodities and cap the Aussie dollar’s gains. Hedging long AUD/USD positions with put options on commodity-linked ETFs could be a prudent way to manage this specific downside risk.
