## The Australian Dollar's Decline Behind the Scenes: Wage Data Meets Expectations but Policy Outlook Diverges

The Reserve Bank of Australia's policy signals are subtly shifting. After the release of the Q3 Wage Price Index, the AUD/USD pair continued to decline, and market expectations for the RBA's future policy path have become divided. Meanwhile, in the international forex market, the US dollar remains relatively strong, and cross pairs such as EUR/CNY are also facing adjustment pressures.

### Wage growth meets expectations but struggles to reverse the AUD's downward trend

Australia's Q3 Wage Price Index increased by 0.8% quarter-on-quarter and 3.4% year-on-year, both in line with market expectations. This data should have supported the Australian dollar, but the AUD/USD currency pair continued to fall after the data release, reflecting market sentiment complexities.

The minutes from the Reserve Bank of Australia's meeting released on Tuesday revealed that board members lean toward adopting a more balanced policy stance. The central bank emphasized that if subsequent data remains strong, it may extend the period of holding the cash rate steady. As of November 18, market pricing indicates only an 8% chance of a rate cut to 3.35% by December 2025, significantly lowering expectations for a near-term RBA rate cut.

### Probability of Fed rate cuts declines, supporting the US dollar

The US Dollar Index (DXY) remains stable around 99.60, a stability driven by changing expectations for Federal Reserve policy. The CME FedWatch tool shows that the probability of the Fed lowering the benchmark interest rate by 25 basis points in December has fallen from 67% a week ago to 49%, indicating a clear retreat in rate cut expectations.

Federal Reserve Vice Chair Philip Jefferson emphasized that the current labor market risks outweigh inflation risks, and any further easing should be "cautiously implemented." Kansas City Fed President Jeffrey Schmid stated that the current policy has formed a "moderately restrictive" level sufficient to "restrain demand growth."

Mixed signals from the US labor market further reinforce the Fed's cautious stance. In October, initial jobless claims were 232,000, with 1.957 million continuing claims; automated data processing reports show employers are laying off an average of 2,500 workers per month. Kevin Hasset, director of the National Economic Council, admitted that some October data was "permanently unavailable" due to the government shutdown.

### Strong Australian employment data supports the AUD

In contrast, Australia's labor market performed more robustly. The October unemployment rate fell from 4.5% in September to 4.3%, below the expected 4.4%. Employment increased by 42,200 jobs in October, far exceeding the forecast of 20,000, representing a significant upward revision from previous data.

RBA Deputy Governor Andrew Housser stated that although the policy remains "restrictive," there is internal discussion within the committee. If the policy shifts away from being "mildly restrictive," it could have a significant impact on future decisions. This statement leaves room for a potential rebound in the AUD.

### Technical outlook: AUD stuck within a rectangular consolidation zone

The AUD/USD traded around 0.6490 on Wednesday, with prices repeatedly consolidating within a rectangular range. Daily chart analysis indicates that the pair remains below the 9-day exponential moving average, with bearish momentum still dominant.

On the downside, the lower boundary of the rectangle at 0.6470 provides key support, with further support at the five-month low of 0.6414 on August 21. On the upside, the psychological level at 0.6500 and the 9-day EMA at 0.6514 form overlapping resistance. If this resistance zone is broken, the AUD could advance toward the upper boundary of the rectangle, targeting near 0.6630.

Currently, the Australian dollar faces two main constraints: first, the declining expectations for Fed rate cuts supporting the US dollar; second, the RBA's cautious policy stance rather than immediate easing. Despite strong local employment data, in an environment of global risk asset pressure, the short-term rebound potential for the AUD remains limited.