The Australian Dollar declined against the US Dollar on Monday after a robust US ISM Manufacturing PMI reading underscored the resilience of the world’s largest economy and scaled back expectations for imminent Federal Reserve rate cuts. The manufacturing indicator rose to 50.3 in January, up from 49.2 in December and comfortably above the 49.5 forecast, returning to expansion territory for the first time in several months.
Markets reacted swiftly to the data. The probability of a 25‑basis‑point Fed rate cut in March, tracked by CME FedWatch, slipped to 28% from 34% a week earlier. This repricing pushed the US Dollar higher across the board, with the AUD/USD pair falling from a session top of 0.6720 to around 0.6690, a 0.3% daily loss. The pair has remained range‑bound between 0.6650 and 0.6750 over the past two weeks.
Diverging monetary‑policy outlooks continue to weigh on the Aussie. While the Reserve Bank of Australia is widely expected to leave its cash rate unchanged at 4.35% in its February meeting—and may lean dovish later in the year—the Fed has signaled caution, with Chair Powell stressing the need for more evidence of inflation moving sustainably toward 2%. The 10‑year US Treasury yield jumped 6 basis points to 4.15% after the ISM release, widening the yield gap with Australian bonds and making the greenback more attractive.
Technical levels now hold extra significance. Immediate support lies at 0.6650, with the 200‑day moving average at 0.6620. A break below could accelerate losses, while a sustained push above 0.6750 would signal renewed upside momentum. Resistance then sits at 0.6800, a level not breached since late December.
Looking ahead, traders will focus on upcoming US jobs data and any fresh commentary from the RBA for further direction. For now, the fundamental picture suggests the US Dollar may retain its near‑term support, keeping the Australian Dollar under pressure.
