Australian Dollar holds gains following TD-MI Inflation Gauge report release

• The Australian Dollar remains firm following the release of the TD-MI Inflation Gauge data on Monday.
• TD-MI Inflation Gauge rose 0.4% MoM in September, rebounding from a previous decline of 0.3%.
• The US Dollar strengthens despite growing expectations of Fed rate cuts and an ongoing government shutdown.

The Australian Dollar (AUD) gains ground against the US Dollar (USD) following the release of the TD-MI Inflation Gauge data, suggesting that inflation may come in hotter than anticipated in the third quarter, despite the Reserve Bank of Australia's (RBA) efforts to keep inflation within its 2-3% target range.

TD-MI Inflation Gauge showed a 0.4% increase month-over-month in September, rebounding from a 0.3% fall in the prior month. Meanwhile, the annual inflation gauge rose 3%, following the previous 2.8% increase. Traders will likely observe speeches from Reserve Bank of Australia (RBA) officials this week, which are expected to provide further insight into the central bank's policy outlook following the latest inflation data.

The RBA kept its Official Cash Rate (OCR) unchanged at 3.6% at the September monetary policy meeting. The Australian central bank warned that inflation has proven more persistent than expected, especially in market services, while the labor market remains tight.

Australian Dollar gains ground despite a stable US Dollar

• The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is gaining ground and trading around 98.00 at the time of writing. However, the Greenback may find challenges amid the rising likelihood of the US Federal Reserve (Fed) rate cuts in the upcoming meetings. The CME FedWatch Tool suggests that markets are now pricing in a 95% chance of a Fed rate cut in October and an 84% possibility of another reduction in December.
• The US Dollar may also struggle as concerns rise after United States (US) Senators failed to pass spending proposals to reopen the federal government for a fourth time, extending the ongoing shutdown into a new week. The closure has suspended key federal programs and delayed major economic reports, including September's jobs data originally due Friday.
• The US ADP Employment Change report, released on Wednesday, showed that private sector payrolls declined by 32,000 in September, while annual pay growth was 4.5%. This figure followed the 3,000 decrease (revised from a 54,000 increase) reported in August and came in below the market expectation of 50,000.
• The latest Job Openings showed the labor market is slowing, yet vacancies rose from 7.21 million to 7.23 million in August. Meanwhile, the hiring rate edged down to 3.2%, the lowest level since June 2024, while layoffs remained at a low level.
• The White House announced that Australian Prime Minister Anthony Albanese and US President Donald Trump will hold their first in-person meeting in Washington, D.C. on October 20 to discuss the Aukus nuclear submarine pact.
• The S&P Global Australia Composite PMI fell to 52.4 in September from 55.5 in August, marking a full year of monthly growth but at the slowest pace since June. Meanwhile, the Services PMI declined to 52.4 from 55.8, signaling continued expansion in the services sector for the 20th straight month, though also at its weakest rate since June.
• Australia's Trade Surplus narrowed to 1,825 million month-over-month (MoM) in August, against 6,500 million expected and 7,310 million in the previous reading. Meanwhile, Exports fell by 7.8% MoM in August from 3.3% seen a month earlier as Gold exports declined after a run of strong months. Imports rose by 3.2% MoM in August, compared to a decline of 1.3% seen in July.

Australian Dollar moves above 0.6600, nine-day EMA

The AUD/USD pair is trading around 0.6610 on Monday. Technical analysis on the daily chart indicates that the pair is moving within the ascending channel, indicating a prevailing bullish bias. Additionally, the 14-day Relative Strength Index (RSI) remains slightly above the 50 level, strengthening the bullish bias.

On the upside, the AUD/USD pair may target the 12-month high of 0.6707, recorded on September 17. A break above this level would support the pair to test the upper boundary of the ascending channel around 0.6780.

The immediate support lies at the psychological level of 0.6600, aligned with the nine-day Exponential Moving Average (EMA) of 0.6598. Further declines would lead to support at the 50-day EMA of 0.6561, followed by the ascending channel's lower boundary around 0.6550. A break below the channel would likely cause the emergence of a bearish bias and put downward pressure on the AUD/USD pair, potentially navigating the region around the fourth-month low of 0.6414, recorded on August 21.

AUD/USD: Daily Chart