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October 9, 2025

AUD/USD Nears 12‑Month High as Inflation Expectations Rise and Dollar Softens

Overview

AUD/USD is trading around 0.6600 and remains inside an ascending daily channel after Australia’s consumer inflation expectations for October rose to 4.8% (from 4.7%), the highest reading since June. That increase, alongside a still-hawkish tilt in RBA communications following the September decision to hold the cash rate at 3.6%, has kept the Aussie bid. At the same time, a softer U.S. dollar — pressured by a prolonged government shutdown and market-priced Fed easing — offers a supportive macro backdrop.

Why this matters now

Two near-term forces are colliding: domestic Australian inflation expectations that could keep RBA caution on the table, and U.S. policy and political risks that are weighing on the dollar. Together they create a favorable setup for AUD/USD to test recent highs, but traders need to respect technical risk points and external shocks such as China’s announced rare-earth export tightening (effective Dec 1), which can influence broader risk sentiment.

Market drivers

Australia: inflation expectations and RBA messaging

October consumer inflation expectations rose to 4.8% from 4.7%, the highest since June. With the RBA still holding the OCR at 3.6% in September, rising expectations increase the chance that the central bank stays cautious about rate cuts or could signal a more hawkish bias if inflation re-accelerates. For forex traders, higher inflation expectations often translate into a firmer AUD as markets price a higher probability of tighter future policy.

United States: dollar pressure from shutdown and Fed pricing

The dollar index (DXY) is trading below 99 (around 98.75), pressured by a ninth consecutive day of a U.S. government shutdown and recent FOMC minutes showing a majority had supported the September rate cut. CME FedWatch now prices a ~25bp cut in October and a high chance of an additional cut by December — see the latest Fed cut odds analysis. Delayed data releases and upcoming Fed Chair remarks are potential catalysts for abrupt moves.

Technical outlook: AUD/USD

Short-term technicals favor the upside while price remains in the ascending channel. Key technical points to watch:

  • Current zone: ~0.6600 inside daily rising channel with 14-day RSI above 50, indicating bullish momentum.
  • Near-term support cluster: 9-day EMA (0.6594), 50-day EMA (0.6564) and the channel lower boundary (~0.6560). A decisive break below these levels could open a corrective leg toward 0.6414.
  • Upside targets: initial resistance at the 12-month high 0.6707; a clean break could extend gains toward the channel upper boundary near 0.6800.

Risks to the trade thesis

Key risks include a surprise acceleration in Australian inflation that triggers volatile repricing of RBA policy expectations, a stronger-than-expected dollar move on the back of U.S. political developments or hawkish Fed commentary, and external shocks such as China’s rare-earth export tightening effective Dec 1 which could impact commodity flows and risk appetite.

Practical trading ideas

Below are tactical approaches for short-term traders while preserving risk management discipline. These are examples, not advice:

  • Bullish scenario: consider a breakout trade on a daily close above 0.6707 with an initial target toward 0.6800; place a stop below the channel median or 50-day EMA to limit downside risk.
  • Bearish scenario: if price breaks and closes below the 9-day EMA and channel lower boundary (~0.6560), short exposure targeting 0.6414, with stops above the recent swing high.
  • Range/mean-reversion: inside the channel, fade extreme intraday moves toward the lower boundary with tight stops—reward-to-risk should be defined before entry. Use confirmation tools like candlestick patterns to validate setups.

Using automation and tools

Given the speed with which macro catalysts (Fed remarks, US shutdown developments, inflation prints) can move FX markets, many traders leverage automated trading and algorithmic rules to manage entries, stops and profit targets. For forex-focused strategies consider a Forex Trading Bot to execute rule-based positions, or use a guided assistant like the Trade Assistant Bot to help monitor technical triggers while you focus on risk management. Be mindful of execution costs—see our note on slippage explained.

Conclusion and next steps

AUD/USD is positioned to extend its short-term uptrend as rising Australian inflation expectations combine with a softer U.S. dollar to support the pair. Key technical levels (9-day and 50-day EMAs, channel boundaries, 0.6707 and 0.6414) will determine whether the trend continues or a corrective move unfolds. Traders should size positions carefully, watch upcoming U.S. political developments and Fed commentary, and be mindful of external supply risks such as China’s export measures.

Whether you trade manually or use automated strategies, the current environment favors disciplined execution and real-time risk controls. For tools and backtesting options visit PlayOnBit to explore the Forex Trading Bot and Trade Assistant Bot.