AUD/USD declines within a horizontal consolidation range amid disappointing Australian economic data

• AUD/USD trades lower for the day but remains within a short-term consolidation range.
• The Australian Dollar weakens following disappointing domestic economic data.
• The US Dollar remains firm despite growing expectations of Fed rate cuts and the ongoing government shutdown.

AUD/USD is falling 0.4% for the day at the time of writing on Tuesday, with the Australian Dollar (AUD) being weighed down by deteriorating household sentiment and weaker labor market conditions in Australia. The Westpac Consumer Confidence Index dropped 3.5% in October to 92.1 from 95.4 in September, marking its sharpest fall since April. Meanwhile, ANZ Job Advertisements declined 3.3% in September, indicating a slowdown in hiring momentum.

These figures reinforce the cautious stance of the Reserve Bank of Australia (RBA), which kept its Official Cash Rate (OCR) unchanged at 3.6% at its last meeting while acknowledging that inflation has proven more persistent than expected. Focus will shift to RBA Governor Michelle Bullock appearance before the Senate Economics Legislation Committee on Friday, which could provide more clarity on the central bank’s policy direction.

On the US front, the US Dollar (USD) continues to attract safe-haven flows amid persistent global political uncertainty. The US Dollar Index (DXY) climbs 0.3% for the day to 98.45 at the time of writing, extending its gains even as markets increase their bets on monetary easing from the Federal Reserve (Fed). According to the CME FedWatch tool, markets now price in a 94% chance of a rate cut in October and an 84% chance of another reduction in December.

Comments from Kansas City Fed President Jeffrey Schmid on Monday also supported the Greenback, as he emphasized the need to preserve the Fed’s inflation-fighting credibility. Meanwhile, the US government shutdown continues, with US senators failing to pass a funding bill for the fourth time in a row. The shutdown has suspended several federal programs and delayed key economic releases, including the September employment report.

AUD/USD technical analysis: Range consolidation continues

AUD/USD 4-hour chart. Source: FXStreet.

The AUD/USD retreats on Tuesday, but the 4-hour chart reveals a more uncertain short-term trend, with the currency pair reverting to a horizontal range between 0.6575 and 0.6630.

The 100-period Simple Moving Average (SMA) on the 4-hour chart, with no clear trend, and the Relative Strength Index (RSI) hovering around the 50 level, underline the indecision on AUD/USD in the short term.

A breakout from the range is therefore still necessary to regain a more directional movement. On the upside, the Aussie could regain the September 17 peak at 0.6707, while on the downside, the pair could target the September 26 low at 0.6521.