Australian Dollar Rebounds Near 0.7000 Amid Mixed Economic Signals
The Australian Dollar (AUD) has surged this week, pushing AUD/USD near the critical 0.7000 mark. This rally builds on last Friday’s gains, despite a strong US Dollar and persistent risk-aversion sentiment. After peaking near 0.7250 in September, the pair dropped over 3 cents to test the 0.6900 support before rebounding. While the 200-day simple moving average (SMA) at 0.7030 remains a key resistance, the Reserve Bank of Australia’s (RBA) hawkish stance and elevated inflation could limit further declines.
Australia’s economy shows resilience but signs of slowing momentum. The Purchasing Managers’ Index (PMI) for Manufacturing dipped to 49.6 in September, while Services PMI eased to 51.9. Trade surpluses remained positive but modest, with August’s surplus at A$0.495 billion. GDP growth slowed to 0.4% quarter-over-quarter in Q2 2026, with annual growth down to 2.1%. Labor market data was mixed, with unemployment rising to 4.6% while employment increased by 39.5K in August. Inflation cooled slightly, with the Trimmed Mean at 3.6% annually, though the RBA expects inflation to normalize only by early 2028.
China’s influence on the AUD remains limited, despite providing stability. China’s GDP grew 4.3% year-over-year in Q2, with Industrial Production up 5.2% year-to-date. Retail Sales lagged, rising just 0.4% annually. Business surveys showed improvement, with Manufacturing and Services PMIs both above 50. The People’s Bank of China kept Loan Prime Rates unchanged, maintaining the one-year rate at 3.00% and the five-year rate at 3.50%.
The RBA raised its Official Cash Rate by 25 basis points to 4.60% on Tuesday, citing persistent inflation and global energy price pressures. Governor Michele Bullock emphasized that domestic capacity pressures remain the primary driver of inflation and warned of potential cost pass-throughs due to the Middle East conflict. The RBA’s policy remains data-dependent, with further rate hikes possible if inflation fails to ease.
The near-term outlook for AUD/USD is cautious, with the pair facing resistance at the 200-day SMA. A sustained rally would require a strong risk-on shift or USD weakness. Downside risks include further risk-aversion, USD strength, or weaker Chinese data. Speculative positioning has turned bearish, with net shorts increasing significantly.