The Australian dollar faces downward pressure as economic data send mixed signals

Wage Growth Meets Expectations, but AUD Struggles to Rebound

Recently, the Australian dollar has weakened against the US dollar, a trend that has become more pronounced after the release of the Q3 Wage Price Index. Data shows that Australia’s seasonally adjusted Wage Price Index increased by 0.8% quarter-over-quarter, unchanged from the previous quarter, aligning with earlier market expectations. On an annual basis, wage growth reached 3.4%, maintaining the pace from the previous quarter, further confirming market forecasts.

However, seemingly moderate economic data has failed to support the AUD. The AUD/USD currency pair hovered around 0.6490 after the data release, with the earlier gains of over 0.25% from the previous trading day already erased. This “data in line with expectations but exchange rate declines” phenomenon reflects a more complex market outlook—investors are shifting focus from wage growth to central bank policy directions.

RBA Signals Caution, Laying the Foundation for Steady Rates

The Reserve Bank of Australia (RBA) conveyed a key message in the November meeting minutes released on Tuesday: board members lean toward a more balanced policy stance. More notably, the RBA hinted that if upcoming data exceeds expectations, it may keep the cash rate unchanged for a longer period.

The implications behind this wording should not be underestimated. Australia’s current employment market remains strong, reinforcing market expectations that the RBA will remain on hold. According to the latest data, the December 2025 ASX 30-day interbank cash rate futures are priced at 96.41, implying only an 8% probability that the RBA will cut rates from 3.60% to 3.35%—a rate cut expectation has largely been priced in by the market.

Divergence in US Labor Market, Fed Slows Rate Cut Pace

The US dollar has maintained strength in the global forex market mainly due to a cooling of expectations for Fed rate cuts. The US Dollar Index (DXY) is currently steady around 99.60, reflecting a shift in market perception of US monetary policy.

Latest data from CME FedWatch further confirms this shift: the probability of the Federal Reserve lowering the target federal funds rate by 25 basis points at the December meeting is 49%, down from 67% a week earlier. Behind this decline is mixed US labor market data.

The Labor Department’s Tuesday report showed that initial unemployment claims for the week ending October 18 were 232,000, with continued claims at 1.957 million, slightly higher than the previous week’s 1.926 million. Meanwhile, the ADP report revealed a more nuanced picture: over the four weeks ending November 1, companies cut an average of 2,500 jobs per week, indicating a slowdown in labor market heating.

Fed Vice Chair Philip Jefferson further reinforced cautious expectations, noting that labor market risks currently outweigh inflation risks, and emphasizing that the Fed should proceed “slowly” on any additional rate cuts. Kansas City Fed President Jeffrey Schmid also stated that current monetary policy is “moderately restrictive” and should continue to “resist demand growth.”

Australia’s Strong Employment Provides Hidden Support for the AUD

Compared to the cooling US labor market, Australia’s employment performance appears more impressive. The Australian Bureau of Statistics released new data on Thursday showing that the October unemployment rate fell from 4.5% in September to 4.3%, below market expectations of 4.4%. More importantly, employment increased by 42,200 jobs in October, far exceeding the market forecast of 20,000—this figure is about three times the revised previous figure of 12,800.

This strong employment data should theoretically boost the AUD, but the market’s rational expectations suggest otherwise: because the employment data was so strong, the likelihood of the RBA cutting rates has further decreased, which in turn constrains the AUD.

Meanwhile, RBA Deputy Governor Andrew Housser’s comments last week are also noteworthy. He stated that “the best estimate is that monetary policy remains restrictive,” but also acknowledged internal disagreements within the committee. Housser added that once policy is no longer in a “mildly restrictive” phase, it will significantly impact future decisions. This suggests the central bank is assessing the boundaries of policy effectiveness.

Technical Outlook Maintains Bearish Pattern, Support Levels Gradually Lower

From a technical perspective, the AUD/USD currently trades around 0.6490 and remains below the 9-day exponential moving average (9-day EMA), indicating that short-term bearish momentum persists. The pair is consolidating within a rectangular range, reflecting a temporary balance between bulls and bears.

In the downward scenario, the lower boundary of the rectangle near 0.6470 provides key support, with the five-month low of 0.6414 on August 21 below that. If bullish momentum wanes, these levels could serve as potential stop-loss points.

On the upside, the psychological level at 0.6500 is the first resistance, followed by the 9-day EMA at 0.6514. A confirmed breakout above these overlapping resistance zones could improve short-term momentum, potentially reaching the upper boundary of the rectangle near 0.6630.

Overall, the Australian dollar faces dual pressures from a strong US dollar and central bank policy expectations. Despite solid domestic employment data, market expectations for a rebound remain limited. Investors should monitor upcoming inflation data and central bank statements, as these will be key triggers for changing market sentiment.