## International Foreign Exchange Risk Rebalancing: US Dollar Strength Offsets Australian Dollar Potential

Recently, the international forex market has exhibited typical risk rebalancing characteristics. Slight adjustments in Federal Reserve policy expectations are reshaping the trend landscape of major global currencies. Non-US currencies such as the Australian dollar, euro, and renminbi are generally under pressure, with the Australian dollar against the US dollar performing particularly weakly, despite solid domestic economic data.

### The Deep Logic Behind the Australian Dollar Under Pressure

On Wednesday, the AUD/USD continued its decline after rising over 0.25% the previous day, but subsequent economic data releases broke this upward momentum. The Australian Bureau of Statistics released Q3 wage price data showing a month-on-month increase of 0.8%, unchanged from previous periods and in line with market expectations. On an annualized basis, wage growth was 3.4%, consistent with market forecasts. While this set of data was not surprising, it also remained respectable.

What is more noteworthy is the latest stance of the Reserve Bank of Australia (RBA). In the November monetary policy minutes, the bank stated that the management team adopts a more balanced policy stance and hinted that if subsequent data exceeds expectations, the timing of maintaining the cash rate could be extended. This "wait-and-see" posture reflects the RBA’s cautious balancing between inflation and employment.

However, the Australian dollar still struggles to benefit from these relatively supportive signals. The reason lies in the dollar’s strength, which far exceeds expectations.

### Market Shift in Fed Rate Cut Expectations Supports the US Dollar

The US Dollar Index (DXY) is currently trading stably around 99.60, showing a clear bullish trend. Market pricing for a Fed rate cut in December has sharply revised downward—according to CME FedWatch, the probability of a 25 basis point rate cut in December has fallen to 49%, down from 67% a week ago. This shift stems from multiple changes in policy signals.

Last Monday, Fed Vice Chair Philip Jefferson indicated that the risks in the labor market now outweigh inflation risks and emphasized that any additional rate cuts should proceed at a "gradual" pace. Jeffrey Lacker, President of the Federal Reserve Bank of Richmond, also stated that monetary policy needs to "offset demand growth pressures" and characterized the current stance as "moderately restrictive," aligning with current market needs.

### Complex Signals from Labor Market Data

US Department of Labor data show that for the week ending October 18, initial unemployment claims were 232,000, and continuing claims remained at 1.957 million, slightly up from 1.926 million. The ADP report reflected more signs of softening—employers cut an average of 2,500 jobs over the four weeks ending November 1.

Kevin Hasset, Chair of the Council of Economic Advisers, warned that some October data might be missing long-term due to government shutdowns preventing data collection. Preliminary private sector data indeed shows signs of cooling in the labor market, and consumer confidence has wavered, with inflation concerns still lingering.

### Australia’s Domestic Data Surpass Expectations

In contrast to the US, Australia’s employment data showed unexpectedly strong performance. The Australian Bureau of Statistics reported on Thursday that the October unemployment rate fell from 4.5% in September to 4.3%, better than the market expectation of 4.4%. The employment change was 42.2K, far exceeding the expected 20K (revised from 12.8K previously).

This data should have provided clear support for the Australian dollar. RBA Deputy Governor Andrew Housser stated last week that "the best estimate is that monetary policy remains restrictive, although there is still debate within the committee." He further noted that if policy ceases to be mildly restrictive, it will have a significant impact on future decisions. Market recognition of the RBA’s cautious stance is increasing, which limits rate cut expectations—by November 18, the ASX 30-day interbank cash rate futures implied only an 8% chance of a rate cut to 3.35% by December 2025 (down from 3.60%).

### Technical Perspective: Bearish Bias in a Consolidation Pattern

On the technical side, the AUD/USD currency pair traded around 0.6490 on Wednesday, in a consolidation within a rectangular range. The price remains below the 9-day exponential moving average (EMA), indicating that bearish momentum still dominates.

Support levels are set in two layers: the first at around 0.6470 near the lower boundary of the rectangle, and a second at the five-month low of 0.6414 created on August 21. On the upside, initial resistance is concentrated at the psychological level of 0.6500, above which lies the 9-day EMA at 0.6514. If the price can effectively break through this overlapping resistance zone, the short-term technical outlook will improve, and the currency pair may reach the upper boundary of the rectangle, near 0.6630.

### Continued Divergence Among Global Central Banks

The pressure faced by the Australian dollar essentially reflects a re-pricing of global central bank policy expectations. Unlike the Fed’s slowdown in rate hikes, other central banks, including the RBA, are adopting a wait-and-see approach, but market pricing for further easing is waning. Non-US currencies such as the euro and renminbi are also under pressure from the strength of the dollar, creating a common dilemma in the international forex market. In this context, the Australian dollar is unlikely to break out of its short-term weakness unless there is a significant reversal in the Fed’s policy outlook.