The Australian Dollar (AUD) gave back its early gains against the US Dollar (USD), with the AUD/USD pair flattening around 0.6970 during the European trading session on Monday as the US Dollar rebounded from earlier losses. This shift in momentum comes as investors adopt a cautious stance ahead of the United States Consumer Price Index (CPI) data for September, which is scheduled for release on Wednesday [1]. The US Dollar Index (DXY), which measures the Greenback against six major currencies, was reported trading flat at approximately 102.20 at the time of writing [1].
Market participants are closely watching the upcoming US CPI data, as it is expected to influence expectations regarding the Federal Reserve's (Fed) interest rate policy. According to the CME FedWatch tool, traders currently believe the Fed will keep interest rates unchanged at its upcoming policy meeting later this month [1]. Analysts at MUFG/BTMU commented that unless there is a significant upside surprise in the inflation data, the Fed is likely to leave rates on hold, reinforcing the market's view that any further tightening is more likely to be delayed rather than implemented immediately [1].
For the Australian Dollar, the major domestic event this week is the release of September employment data, scheduled for Thursday. The consensus and previous unemployment rate figures stand at 4.6%, according to the Australian Bureau of Statistics [1]. A rise in the unemployment rate would be seen as bearish for the AUD, while a decrease would be bullish [1].
From a technical perspective, AUD/USD is trading at 0.6972, maintaining a bearish near-term bias as it remains below the 20-day exponential moving average (EMA) at 0.7015. The Relative Strength Index (RSI) is near 39, indicating weak but not extreme downside momentum. Key resistance is at the 20-day EMA (0.7015), while support levels are noted at the October 1 low near 0.6900 and the June 30 low at 0.6865 [1].
CONCLUSION
The AUD/USD pair is under pressure as the US Dollar rebounds and traders await critical US inflation and Australian employment data. Market sentiment leans cautious, with expectations that the Fed will hold rates steady unless inflation surprises to the upside. The upcoming Australian jobs report will be a key driver for the AUD in the near term.