AUD/USD Consolidates Near September Peak as RBA-Fed Policy Divergence Supports Aussie

Australian Dollar strengthens as market prices in contrasting central bank rate paths. The AUD/USD currency pair is holding firm in a narrow trading band around the 0.6640 level, hovering near its strongest levels since mid-September as traders await crucial economic data and monetary policy announcements this week. The Reserve Bank of Australia and the US Federal Reserve are expected to take divergent policy paths, creating tailwinds for the Australian Dollar against its American counterpart.

Policy Divergence Fuels AUD/USD Momentum

The fundamental backdrop continues to favor the Australian currency. While the Federal Reserve is widely expected to cut rates by 25 basis points this Wednesday—with CME FedWatch Tool indicating a 90% probability of this move—Australia’s central bank appears poised to maintain its current stance. RBA Governor Michele Bullock recently underscored that inflation remains above target, still not sustainably within the 2% to 3% band. More significantly, Australia’s economy expanded at its fastest annual rate in two years, coupled with a robust labour market, fueling speculation that rate hikes could emerge next year rather than cuts.

This contrasting monetary policy environment represents a significant tailwind for spot prices, keeping US Dollar investors on the sidelines while supporting Australian Dollar strength.

China Trade Data and Technical Levels in Focus

The coming week’s direction for AUD/USD will likely hinge on China’s Trade Balance release scheduled for Monday morning, which serves as a key economic barometer given Beijing’s influence on global growth. A stronger-than-expected trade surplus could provide additional support to risk-sensitive currencies like the Australian Dollar, while disappointing data might trigger corrective pullbacks.

From a technical perspective, the pair’s consolidation near September highs suggests buyers remain in control. Any meaningful pullback is likely to attract fresh buying interest, as the overall trend remains biased to the upside. Traders are currently exercising caution ahead of the Fed’s policy decision and updated economic projections, with Jerome Powell’s post-meeting commentary expected to provide additional guidance on the central bank’s rate-cut trajectory.

The Australian Dollar has emerged as a beneficiary of the diverging monetary policy expectations between the RBA and Fed, with the technical setup favoring continued strength above current support levels in the weeks ahead.