Australian Dollar Shows Signs of Near-Term Recovery Amid Fed Uncertainty

The Australian dollar (AUD) extended its decline against major currencies last week, marking its fourth consecutive week of losses. However, softer US payrolls and reduced expectations for a Federal Reserve rate hike in October suggest that the AUD's downward momentum may be slowing. The odds of an October Fed rate hike dropped from 70% to 22%, influenced by dovish comments from Fed officials. Attention is now on the upcoming FOMC minutes, which could provide further insights into policymakers' stance on future rate hikes.

Technical analysis indicates that AUD/USD's decline could face a near-term reprieve. The pair rebounded from a key support level at 0.6907, and options traders have increased their demand for puts relative to calls. Additionally, the US dollar's recent weakness may provide a bullish cue for AUD/USD, as the pair holds a strong inverse correlation with the DXY index.

On the Australian front, there is little top-tier economic data scheduled this week. However, the Westpac consumer confidence report is worth monitoring, as it has shown rising concerns over unemployment and interest-rate hikes. Traders should also keep an eye on the ISM services PMI, which will offer a read on underlying growth, inflation, and employment trends in the US.

From a technical perspective, AUD/USD remains below its 20-day simple moving average, suggesting that some bullish mean reversion could be due. Meanwhile, other AUD pairs like AUD/CAD and AUD/NZD show potential for dip buying opportunities. Overall, while the US dollar remains the dominant driver, commodity prices and China-sensitive assets continue to play a significant role in AUD/USD's performance.