AUD/USD Eyes 0.6700 as Markets Bet on RBA Steadfastness Against Looming Fed Cuts

Summary:

AUD/USD climbed toward 0.6600 after Q3 GDP data showed weaker headline growth but surprisingly resilient domestic demand. With the RBA likely to hold rates while markets expect aggressive Fed cuts, the widening policy gap could push AUD/USD toward 0.6700, supported by strong technical momentum.

Buy AUDUSD

End Time

CLOSED

0.65900

ENTRY

0.67000

TGT

0.65300

0.66115 +0.00108 +0.16%

205

Points

Profit

0.65300

0.66105

CLOSING

0.65900

ENTRY

0.67000

TGT

The Australian dollar advanced to a multi-week high near 0.6600 on Wednesday, as traders looked past a softer-than-expected GDP headline and instead focused on the underlying strength of private investment and household consumption. The latest figures, while modest on the surface, effectively reinforced the Reserve Bank of Australia’s case for remaining on hold — a stance that stands in stark contrast to expectations for significant policy easing from the U.S. Federal Reserve next year.

Australia’s economy expanded 0.4% in the third quarter, slowing from 0.7% in Q2 and falling short of both market forecasts (0.7%) and the RBA’s own 0.5% projection. On an annual basis, GDP rose 2.1%, broadly aligned with the central bank’s estimate for year-end growth around 2%, suggesting the economy retains enough underlying momentum to keep inflationary pressures from fading too quickly.

Yet the headline disappointment masked a sturdier story beneath the surface. The largest drag came from inventory destocking, which shaved 0.5 percentage points off growth — a temporary factor rather than a signal of weakening demand. Stripping this out reveals a surprisingly solid performance in private domestic demand, the area the RBA watches most closely for inflation persistence.

Private investment added 0.5 percentage points to GDP, fueled by large-scale data center expansions and continued corporate capital expenditure. Household consumption also contributed positively, adding 0.3 percentage points, driven primarily by essential spending rather than discretionary splurges. In other words, Australian consumers are cautious but not collapsing, and businesses continue to deploy capital with confidence despite tighter financial conditions.

This divergence in domestic and external pressures gives policymakers little reason to shift their current bias. Markets seem to agree — the swaps curve continues to price additional tightening risks in Australia over the next year, even as traders expect the Fed to deliver up to 100 basis points of cuts. For currency markets, that creates a widening one-year implied policy rate differential squarely in the Australian dollar’s favor.

Analysts at Brown Brothers Harriman (BBH) argue that this gap provides material upside for AUD/USD, potentially pushing the pair toward 0.6700 in the months ahead if U.S. yields continue to decline while Australian rates stay anchored at elevated levels. For now, traders appear comfortable leaning into that narrative, with the Aussie’s latest surge suggesting growing conviction that policy spreads matter more than soft patches in headline growth.

Technical Analysis

From a technical standpoint, AUD/USD continues to reinforce its bullish bias, with price action preparing to challenge the immediate resistance level at 0.6580. The pair is finding dynamic support from the 50-day EMA, which has acted as a springboard for intraday rallies, while relative strength indicators are flashing constructive signals despite extended readings.

Momentum remains firmly tilted to the upside, shaped by a minor but persistent bullish wave on the short-term time frame. The strong and broadening volume profile around recent gains underscores buyers’ commitment, suggesting that a clean break above 0.6580 could open the door for a retest of the psychological 0.6700 handle — a level increasingly aligned with the macro narrative of widening policy divergence.

TRADE RECOMMENDATION

BUY AUDUSD

ENTRY PRICE: 0.6590

STOP LOSS: 0.6530

TAKE PROFIT: 0.6700

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Warren Takunda

Analysts

Warren Takunda, a seasoned finance leader specializing in the Middle East, is a trusted senior analyst with a proven track record. As head of the finance team, he excels in financial planning, analysis, and reporting. Warren's expertise in financial modeling and investment analysis delivers valuable insights to clients.

Rank

Articless

1910

Win Rate

63.73%

P/L Ratio

0.72

Focus on

XAUUSD, EURUSD, GBPUSD

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