AUD/USD begins the week with a six-day winning streak, marking its most robust performance since April. This trend is fueled by widespread US dollar weakness, strong Australian economic data, and a solid appetite for risk. As Q3 GDP approaches and the US data calendar is filled with PMIs, PCE, and labor metrics, it is anticipated that traders will encounter heightened volatility. On the Australian front, the primary focus this Wednesday will be the Q3 GDP report, with the current account release encompassing the net export contribution to GDP, and any unexpected results potentially prompting major banks to revise their GDP forecasts ahead of schedule — sometimes resulting in significant market movements.
In Q2, annual GDP growth increased to a seven-quarter high of 1.8%, with projections indicating that the quarterly rate will rise to 0.7% in Q3, marking the strongest performance since Q4 2022. Considering the strong inflation report, robust labor statistics, and steady consumer spending, the likelihood appears to favor an upside surprise rather than a shortfall, which would likely elevate H2 2026 rate-hike expectations and bolster the Australian dollar during a month that historically yields seasonally positive returns. This week, the US is set to release a wealth of data, including ISM PMIs, S&P Global PMIs, PCE inflation, and employment figures from ADP and JOLTS. Market participants continue to exhibit heightened sensitivity to weaker US economic data as a rationale for potential interest rate reductions, and with President Trump redirecting his criticism toward Jerome Powell, it is unsurprising that several FOMC members are adopting a dovish stance ahead of the blackout period.
Given the robustness of Australian data and the tendency of USD bears to prioritize negative news in light of dovish Fed discussions, AUD/USD appears poised for further upward movement this week. The 10-day correlations indicate that the trajectory of the Australian dollar is closely linked to Federal Reserve expectations (through the US dollar) and prevailing risk sentiment on Wall Street, with the 10-day correlation between AUD/USD and the Nasdaq 100 at 0.83, and the inverse correlation with the DXY even stronger at -0.85. The resurgence of these correlations, which were weak only a few weeks ago, is noteworthy as we approach a data-heavy week in the US, and the positive correlation CNH/USD and AUD/USD has re-emerged, likely indicating broader USD dynamics rather than standalone CNH strength.
The weekly chart indicates a bullish engulfing candle positioned above the August low, and dips toward 0.6500 may attract buyers given the proximity of the 200-day EMA (0.6496). Additionally, the 50-day EMA at 0.6520, the monthly pivot at 0.6516, and the VPOCs around 0.6527 may help restrict retracements and maintain shallow pullbacks. The potential for a move toward the October high — and a possible breakout above it — remains on the table, though the November high at 0.6580 could act as a resistance point during this progression.