AUD/USD Breakout: Fed Cut Bets Ignite Aussie Rally Toward the $0.66 Mark
During the early European session on Monday, the AUD/USD pair drifted higher toward $0.6555, supported primarily by weakness...
Quick overview
- The AUD/USD pair rose to $0.6555, supported by a weaker US dollar amid increased expectations for a Federal Reserve rate cut in December.
- Markets are anticipating significant US economic data, including ISM Manufacturing and Services PMI, which could further influence USD sentiment.
- China's disappointing Manufacturing PMI limited the Australian dollar's gains, as weaker demand expectations from Australia’s largest export market capped upward momentum.
- Technical indicators suggest a bullish outlook for AUD/USD, but potential range-bound trading is expected until clearer economic signals are available.
During the early European session on Monday, the AUD/USD pair drifted higher toward $0.6555, supported primarily by weakness in the US dollar. The greenback lost momentum as markets sharply increased their expectations for a Federal Reserve rate cut in December, giving the Aussie a modest lift despite mixed regional data.
USD Weakness Driven by Rising Fed Cut Expectations
The US dollar slipped broadly as traders priced in a higher probability of monetary easing. According to the CME FedWatch Tool, markets now assign an 87.4% chance of a 25-basis-point rate cut, lowering the target range to 3.50%–3.75%.
Attention now shifts to a heavy US data lineup, including ISM Manufacturing and Services PMI and ADP Employment Change. The ISM Manufacturing PMI is projected at 48.6, slightly below October’s 48.7. Any downside surprise could reinforce expectations for a dovish Fed stance, likely deepening pressure on the USD.
China’s Softer Manufacturing Data Limits AUD Upside
The Australian Dollar initially struggled after China’s November Manufacturing PMI unexpectedly dipped to 49.9, below forecasts of 50.5 and the prior 50.6. As China remains Australia’s largest export market, weaker Chinese demand expectations have capped the Aussie’s upward momentum.
Markets are also awaiting Australia’s Q3 GDP, due Wednesday, where growth is forecast at 0.7%, slightly above the previous 0.6%. A stronger print may lend fresh support to the AUD.
AUD/USD Technical Outlook
AUD/USD is showing improving technical strength after breaking above the descending trendline that has limited gains since mid-October. The pair is holding comfortably above $0.6535, while the 20-EMA continues to provide intraday support. RSI sits near 69, signaling firm bullish momentum, though approaching overbought territory.
Price now faces a key test at $0.6580, a historical reaction level that triggered sharp reversals in past sessions. A confirmed close above this zone would signal a structural shift and open the door toward $0.6613 and $0.6641.
If the pair pulls back, the trendline and $0.6535 area remain crucial first-layer support. A break below this region would soften the outlook and expose $0.6503.
AUD/USD Outlook
With US dollar sentiment weakening and technical signals turning positive, AUD/USD may continue trading with a mild upward bias. However, China data softness and upcoming GDP figures suggest the pair may remain range-bound until clearer economic signals emerge from both the US and Australia.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Save