The US dollar climbed above the 100 mark, and Australian dollar bulls said: "I can hear my own heart breaking."
2025-11-04 20:15:12
On Tuesday (November 4th) during the European session, the Australian dollar traded sideways around 0.6500 against the US dollar after retracing to a 10-day low, hitting a low of 0.6491 during the session. The exchange rate fell nearly 0.6% from the previous close, showing short-term weakness. Traders are focusing on the latest policy statement from the Reserve Bank of Australia and the repricing effect of subsequent data this week on the market's direction.
The Reserve Bank of Australia (RBA) kept the cash rate unchanged at 3.6%, in line with market expectations. Inflation stickiness remains a core constraint on policy direction: Statistics Bureau data showed that the CPI accelerated to 1.3% quarter-on-quarter in the third quarter, higher than the expected 1.1% and the previous value of 0.7%. This means that price momentum remains above the tolerance range, and policymakers are becoming more cautious in balancing "controlling inflation" and "stabilizing growth." After the meeting, RBA Governor Michelle Bullock emphasized that core inflation above 3% is "not ideal" and that "a little tightening is needed to cool the economy and bring inflation back down." She did not provide forward guidance on when or by how much to cut interest rates, citing "significant uncertainty surrounding inflation." This statement is relatively cautious, neither explicitly shifting to easing nor ruling out the possibility of tightening again if inflation falters, a typical "data-dependent" framework.
For the Australian dollar, the combination of unchanged policy and a "hawkish patience" typically has two effects: First, if inflation remains sticky, the Reserve Bank of Australia's tight stance may be prolonged, providing neutral-to-bullish marginal support for Australian dollar interest rate differentials and carry trades; second, if growth weakens again or inflation falls faster than expected, the market will pre-emptively price in the discounted path of future easing, putting pressure on the Australian dollar. In the short term, the market will need to wait for the September trade balance to be released this Thursday, which will provide additional information on pro-cyclical commodities and external demand.
On the other hand, the US dollar remained strong. Market bets on further rate cuts by the Federal Reserve this year cooled, and the dollar index hit a three-month high, breaking through the 100.00 mark. Implied probabilities from federal funds rate futures showed that the probability of a 25 basis point rate cut to 3.50%-3.75% at the December meeting fell from 94.4% a week ago to 67.3%. As the path of "fewer rate cuts and later rate cuts" is repriced, the dollar receives broad buying, putting downward pressure on the Australian dollar against the US dollar. The broad-spectrum impact on risk assets will also be transmitted to the foreign exchange market through changes in interest rate terminal prices and term premiums, strengthening the dollar's short-term dominance.
In summary, the fundamental signals currently suggest that the Reserve Bank of Australia's "cautiously hawkish" stance is insufficient to offset the dollar's temporary strength. Coupled with the wait-and-see attitude before the data release, the Australian dollar's rebound lacks sustainability and its direction is easily swayed by external dollar factors.
The 30-minute candlestick chart shows that after falling from the high of 0.6562, the exchange rate oscillated lower along the short-term downward channel, reaching a low of 0.6491. The 0.6500 level forms an immediate psychological level, but the pullback high of 0.6517 has now become short-term resistance. If it cannot hold above this level, any rebound is likely to be a technical correction.
Regarding the MACD (26,12,9), both the DIFF and DEA are below the zero axis and have not formed a golden cross. The histogram is still negative, indicating that although the downward momentum has slowed down in stages, the trend has not yet reversed. The RSI (14) hovers around 35, in the weak range but not in extreme oversold territory, suggesting that the short-term trend is still mainly characterized by selling pressure on rallies, and the probability of a technical rebound followed by a choice of direction is higher. Structurally, 0.6491 is the first support level. If it breaks down, the bears may target the lower edge of the 0.6480 range. On the upside, 0.6517 is the first resistance level, with further resistance at 0.6533 and 0.6562. Only by effectively recovering 0.6517 and breaking through with volume can a retracement to the 0.6533-0.6562 range be triggered. Otherwise, the probability of a continuation of the weak oscillation is higher.
Judging from the synchronization between market activity and news, market sentiment is currently leaning towards a "cautious and defensive" approach. On the one hand, the Reserve Bank of Australia has not released any clear easing signals, and short sellers lack a sustained driver based on a significant policy shift. On the other hand, the US dollar has sustained buying interest within the broader framework of "cooling expectations of interest rate cuts," putting short-term pressure on risk appetite and carry trades. If subsequent data this week fails to change the dominant logic of the US dollar, short-selling sentiment will become more persistent; conversely, if the trade balance is better than expected and the US dollar retreats from its recent highs, it could easily trigger a technical rebound in the Australian dollar and short covering. The turning point in sentiment still depends on the consistency of direction between "policy path × unexpected data," rather than a single sideways news item.
Short-term scenario (1-3 days)
If 0.6517 is not effectively recovered and the US dollar remains near a three-month high, the Australian dollar against the US dollar will likely fluctuate weakly within the 0.6491-0.6517 range, with the risk of the lower edge of the range being repeatedly tested increasing. Once it breaks below 0.6491 with significant volume expansion, the bears may open a window for further downward momentum. At that point, attention should be paid to the secondary support around 0.6480 and the psychological defense line at the psychological level. This scenario is driven by the confluence of a strong US dollar and an unresolved technical situation.
In a short-term rebound scenario, if the exchange rate regains its footing above 0.6517 and the MACD histogram further converges, the rebound will first target 0.6533, then challenge 0.6562. This area coincides with the previous high and the upper edge of the channel, representing a zone of strong resistance and dense supply. Unless accompanied by a weakening dollar and improved interest rate differential expectations, a breakthrough and sustained hold in one go will be difficult. The core of this scenario lies in the combined catalyst of a "stage-wise pullback in the dollar" and "strong Australian data."
Fundamentals: The Reserve Bank of Australia holds rates steady amid a stubborn tug-of-war with inflation.
The Reserve Bank of Australia (RBA) kept the cash rate unchanged at 3.6%, in line with market expectations. Inflation stickiness remains a core constraint on policy direction: Statistics Bureau data showed that the CPI accelerated to 1.3% quarter-on-quarter in the third quarter, higher than the expected 1.1% and the previous value of 0.7%. This means that price momentum remains above the tolerance range, and policymakers are becoming more cautious in balancing "controlling inflation" and "stabilizing growth." After the meeting, RBA Governor Michelle Bullock emphasized that core inflation above 3% is "not ideal" and that "a little tightening is needed to cool the economy and bring inflation back down." She did not provide forward guidance on when or by how much to cut interest rates, citing "significant uncertainty surrounding inflation." This statement is relatively cautious, neither explicitly shifting to easing nor ruling out the possibility of tightening again if inflation falters, a typical "data-dependent" framework.
For the Australian dollar, the combination of unchanged policy and a "hawkish patience" typically has two effects: First, if inflation remains sticky, the Reserve Bank of Australia's tight stance may be prolonged, providing neutral-to-bullish marginal support for Australian dollar interest rate differentials and carry trades; second, if growth weakens again or inflation falls faster than expected, the market will pre-emptively price in the discounted path of future easing, putting pressure on the Australian dollar. In the short term, the market will need to wait for the September trade balance to be released this Thursday, which will provide additional information on pro-cyclical commodities and external demand.
On the other hand, the US dollar remained strong. Market bets on further rate cuts by the Federal Reserve this year cooled, and the dollar index hit a three-month high, breaking through the 100.00 mark. Implied probabilities from federal funds rate futures showed that the probability of a 25 basis point rate cut to 3.50%-3.75% at the December meeting fell from 94.4% a week ago to 67.3%. As the path of "fewer rate cuts and later rate cuts" is repriced, the dollar receives broad buying, putting downward pressure on the Australian dollar against the US dollar. The broad-spectrum impact on risk assets will also be transmitted to the foreign exchange market through changes in interest rate terminal prices and term premiums, strengthening the dollar's short-term dominance.
In summary, the fundamental signals currently suggest that the Reserve Bank of Australia's "cautiously hawkish" stance is insufficient to offset the dollar's temporary strength. Coupled with the wait-and-see attitude before the data release, the Australian dollar's rebound lacks sustainability and its direction is easily swayed by external dollar factors.
Technical aspects:
The 30-minute candlestick chart shows that after falling from the high of 0.6562, the exchange rate oscillated lower along the short-term downward channel, reaching a low of 0.6491. The 0.6500 level forms an immediate psychological level, but the pullback high of 0.6517 has now become short-term resistance. If it cannot hold above this level, any rebound is likely to be a technical correction.
Regarding the MACD (26,12,9), both the DIFF and DEA are below the zero axis and have not formed a golden cross. The histogram is still negative, indicating that although the downward momentum has slowed down in stages, the trend has not yet reversed. The RSI (14) hovers around 35, in the weak range but not in extreme oversold territory, suggesting that the short-term trend is still mainly characterized by selling pressure on rallies, and the probability of a technical rebound followed by a choice of direction is higher. Structurally, 0.6491 is the first support level. If it breaks down, the bears may target the lower edge of the 0.6480 range. On the upside, 0.6517 is the first resistance level, with further resistance at 0.6533 and 0.6562. Only by effectively recovering 0.6517 and breaking through with volume can a retracement to the 0.6533-0.6562 range be triggered. Otherwise, the probability of a continuation of the weak oscillation is higher.
Market Sentiment Observation: "Cautious Defense" Dominated by a Strong Dollar
Judging from the synchronization between market activity and news, market sentiment is currently leaning towards a "cautious and defensive" approach. On the one hand, the Reserve Bank of Australia has not released any clear easing signals, and short sellers lack a sustained driver based on a significant policy shift. On the other hand, the US dollar has sustained buying interest within the broader framework of "cooling expectations of interest rate cuts," putting short-term pressure on risk appetite and carry trades. If subsequent data this week fails to change the dominant logic of the US dollar, short-selling sentiment will become more persistent; conversely, if the trade balance is better than expected and the US dollar retreats from its recent highs, it could easily trigger a technical rebound in the Australian dollar and short covering. The turning point in sentiment still depends on the consistency of direction between "policy path × unexpected data," rather than a single sideways news item.
Market Outlook: Path Fork and the Battle of Key Levels
Short-term scenario (1-3 days)
If 0.6517 is not effectively recovered and the US dollar remains near a three-month high, the Australian dollar against the US dollar will likely fluctuate weakly within the 0.6491-0.6517 range, with the risk of the lower edge of the range being repeatedly tested increasing. Once it breaks below 0.6491 with significant volume expansion, the bears may open a window for further downward momentum. At that point, attention should be paid to the secondary support around 0.6480 and the psychological defense line at the psychological level. This scenario is driven by the confluence of a strong US dollar and an unresolved technical situation.
In a short-term rebound scenario, if the exchange rate regains its footing above 0.6517 and the MACD histogram further converges, the rebound will first target 0.6533, then challenge 0.6562. This area coincides with the previous high and the upper edge of the channel, representing a zone of strong resistance and dense supply. Unless accompanied by a weakening dollar and improved interest rate differential expectations, a breakthrough and sustained hold in one go will be difficult. The core of this scenario lies in the combined catalyst of a "stage-wise pullback in the dollar" and "strong Australian data."
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