• The Australian Dollar advances after a strong increase in private capital expenditure in Australia during the third quarter.
• Monthly inflation reinforces the cautious stance of the Reserve Bank of Australia regarding persistent price pressures.
• The US Dollar remains under pressure as markets strongly anticipate a Federal Reserve rate cut in December.

AUD/USD trades around 0.6525 on Thursday at the time of writing, up 0.12% on the day. The Australian Dollar (AUD) continues to appreciate against the US Dollar (USD), supported by a market environment where expectations of monetary easing by the Federal Reserve (Fed) are intensifying.

The Aussie finds initial support from the release of private capital expenditure for the third quarter by the Australian Bureau of Statistics (ABS), which showed a strong 6.4% QoQ increase, far exceeding expectations. In addition, the first full monthly Consumer Price Index (CPI) reading showed inflation rising 3.8% YoY in October, beating forecasts and reinforcing the view that price pressures remain too high for the Reserve Bank of Australia (RBA) to ease policy anytime soon.

This backdrop fuels the RBA’s cautious stance, as the central bank is widely expected to keep its cash rate unchanged at 3.6% in December. Policymakers have noted that despite a slight uptick in unemployment, the labor market remains broadly healthy. Expectations for a near-term policy cut, therefore, remain very limited.

Meanwhile, the US Dollar is weighed down by shifting expectations for US monetary policy. Investors now see more than an 84% chance of a 25-basis-point rate cut by the Fed in December, according to the CME FedWatch tool, an impressive jump from the previous week. More dovish-leaning remarks from several Fed officials, including Governor Christopher Waller and Federal Reserve Bank of New York President John Williams, have reinforced the perception that easing may be imminent.

Recent US economic data has not been strong enough to change that narrative. Weekly Initial Jobless Claims fell more than expected, while growth in Durable Goods Orders and stable Producer Price Index readings point to moderate inflationary pressures. However, slowing Retail Sales and a sharp deterioration in Consumer Confidence highlight weakening domestic demand.

In this context, the divergence between a vigilant RBA and a Fed seen as closer to a dovish pivot supports the Australian Dollar.

AUD/USD Technical Analysis

In the 4-hour chart, AUD/USD trades at 0.6526, below the day’s open by 6 pips and little changed on a daily basis. The 100-period Simple Moving Average (SMA) continues to edge lower near 0.6499, while price holds above it, hinting at an improving near-term tone. A descending trend line drawn from 0.6618 caps advances, with immediate resistance clustered around the 0.6545 break point. The Relative Strength Index (RSI) eases to 65.85, remaining above the midline and indicating firm momentum that could cool if the pair stalls beneath the trend barrier.

A sustained push through 0.6545 would open the path toward immediate resistance at 0.6580, then 0.6618. RSI near 66 is not overbought and could stretch higher on a breakout, while failure to clear the trend cap would keep the pair contained, with pullbacks supported by the 100-period SMA at 0.6499.

(The technical analysis of this story was written with the help of an AI tool)