Australian Dollar Falters Following Grim Westpac Consumer Confidence Data

The Aussie dollar is taking a beating Tuesday, retreating from yesterday’s gains against the greenback after some particularly dismal economic indicators. October’s Westpac Consumer Confidence plunged 3.5% month-over-month to 92.1, accelerating from September’s already concerning 3.1% drop and marking the steepest decline since April. Meanwhile, ANZ Job Advertisements cratered 3.3% in September, dramatically worse than the previous month’s modest 0.3% dip.

I’m watching the AUD/USD pair hover nervously around 0.6610, and frankly, the outlook isn’t inspiring much confidence. Despite trading within an ascending channel that technically suggests bullish momentum, these latest economic figures paint a worrying picture of Australia’s economic health.

What’s particularly frustrating is that Monday’s TD-MI Inflation Gauge showed inflation might run hotter than expected in Q3, despite the Reserve Bank of Australia’s desperate attempts to wrangle it into their 2-3% target range. The RBA kept rates steady at 3.6% last month, but they’re clearly concerned about persistent inflation, especially in services, while simultaneously facing a deteriorating employment landscape.

The US dollar continues strengthening despite what should be negative factors - the ongoing government shutdown (now entering another week after four failed attempts to pass spending proposals) and increased market expectations for Fed rate cuts. Markets are now pricing in a 94% chance of an October cut and 84% for December, yet the dollar index keeps climbing, trading around 98.10.

Kansas City Fed President Jeffrey Schmid’s hawkish comments Monday didn’t help matters, insisting inflation remains “too high” and current monetary policy is “appropriately calibrated.” This despite clear evidence the US labor market is cooling - private sector payrolls declined by 32,000 in September according to ADP data, following August’s revised decrease of 3,000.

Looking at the technical picture, AUD/USD faces immediate support at the psychological 0.6600 level, coinciding with the nine-day EMA at 0.6602. If these levels break, we’re looking at potential drops toward the 50-day EMA around 0.6563. On the upside, the pair could target September’s 12-month high of 0.6707, but given the current economic backdrop, I’m skeptical about its ability to reach those heights again anytime soon.

I’ll be closely watching RBA officials’ speeches this week for any hints about their policy direction, but with consumer confidence tanking and job ads plummeting, they’re in an increasingly difficult position balancing inflation concerns against economic growth. The upcoming meeting between Australian PM Albanese and US President Trump on October 20 might introduce additional market volatility, especially regarding discussions on the Aukus submarine pact.

For now, the Aussie remains the weakest performer against the US dollar among major currencies, reflecting both domestic economic concerns and the greenback’s surprising resilience despite its own challenges.