Kiwi dollar stays under pressure amid weak Chinese data and firm US dollar

Key Movers

The US Dollar Index (DXY), which measures the Greenback against a basket of major currencies, continues to hover near its lowest level since October 7, reflecting growing expectations that the Federal Reserve will deliver additional interest rate cuts in the coming months. These shifting rate expectations have kept the US dollar on the back foot and provided some underlying support to risk-sensitive currencies, including the Australian dollar.

Market sentiment toward the US dollar has softened as investors increasingly price in a more accommodative policy outlook from the Fed. Recent economic signals have pointed to cooling inflation and a gradual slowdown in economic activity, strengthening the case for lower borrowing costs. As a result, demand for the Greenback has eased, allowing currencies such as the Australian dollar to gain some breathing room.

Adding to the pressure on the US dollar are ongoing discussions around the future leadership of the Federal Reserve. Expectations that the eventual replacement of Fed Chair Jerome Powell could lean more dovish have reinforced the view that US monetary policy may become more supportive of growth rather than restrictive. This outlook has further limited upside momentum for the US dollar and acted as a potential tailwind for the AUD/USD pair.

Despite the softer tone in the US dollar, traders appear cautious and are refraining from placing aggressive directional bets. Attention is firmly focused on a busy macroeconomic calendar, starting with the delayed US Nonfarm Payrolls report for October. The closely watched employment data could provide important clues about the health of the US labour market and influence expectations around the timing and scale of future Fed rate cuts.

In the meantime, market participants are opting to stay on the sidelines, waiting for clearer signals before committing to new positions. This hesitation has resulted in relatively subdued price action in major currency pairs, including AUDUSD, as traders seek confirmation from hard data rather than relying solely on policy speculation.

From a technical perspective, the AUDUSD pair has been trading within an upward trend that has been in place for around three weeks. However, the recent lack of strong follow-through selling suggests that this uptrend may not yet be exhausted. Analysts note that a decisive break below key support levels, accompanied by increased selling volume, would be needed to confirm a shift in near-term momentum.

Looking ahead, the direction of the AUDUSD pair is likely to depend on incoming US economic data and how it shapes expectations for Federal Reserve policy. If the data reinforce the case for rate cuts, the US dollar could remain under pressure, supporting the AUD. Conversely, any upside surprises in employment or inflation could offer the Greenback some relief.

For now, patience appears to be the dominant theme. With major data releases on the horizon, traders may prefer to wait for clearer confirmation before concluding that the AUD/USD pair’s recent uptrend has run out of steam.