Above 0.7000: Australian Dollar strengthens as attention turns to Australia's CPI and Fed rate decision

• 0.7025 is in focus as AUD/USD inches up towards that level in Tuesday’s Asian trading.
• The inflation fight is "not quite yet" over, according to RBA’s Hunter.
• Wednesday brings Australia’s CPI inflation release and the Fed’s interest rate decision into focus.

AUD/USD strengthens towards 0.7025. Hawkish expectations for Reserve Bank of Australia (RBA) interest rates support the pair during Tuesday’s Asian session. Traders are preparing for Australia’s September Consumer Price Index (CPI) inflation release on Wednesday, before the US Federal Reserve (Fed) announces its interest rate decision.

At 4.6%, the RBA’s interest rate reached a 15-year high following its late-September increase. Assistant Governor Sarah Hunter indicated that the central bank was “not quite yet” finished with its inflation fight. Her remarks signal that further rate increases are likely at the policy meeting early next month.

Hunter described the board’s response to inflation: “The board have put through four rate hikes this year to keep on tackling the challenge”. She said: “Unfortunately, not quite yet.” On the policy outlook, Hunter added: “I’m not going to front run what the board might or might not do with interest rates. All I do know is that they are committed to tackling inflation and getting inflation down,”

Wednesday’s Australian inflation figures will offer traders further guidance on the interest rate outlook. Forecasts put September’s headline CPI increase at 4.2% YoY, compared with 4.0% previously. Monthly CPI inflation is projected to accelerate from August’s 0.4% to 0.7% in September.

Later on Wednesday, the focus turns to the Fed’s policy meeting. Following September’s increase, economists anticipate that the US central bank will hold interest rates steady. Expectations of further tightening nevertheless remain high. Markets assign a strong probability to another rate rise in December.

0.7070 Target: UOB Retains Positive AUD/USD Outlook

A positive medium-term AUD/USD outlook remains in place at UOB Group. Its strategists recall that they “turned positive on AUD last Wednesday (21 Oct, spot at 0.7005), indicating that AUD ‘could rise toward 0.7035.’” With that first objective achieved, they explain that “after AUD tested 0.7035, we highlighted on Thursday (22 Oct, spot at 0.7025) that AUD ‘could advance further, though the next technical target at 0.7070 may not come into view so soon.’” Their position is to “continue to hold the same view as long as 0.6985 (no change in ‘strong support’ level) is not breached,” according to UOB. That leaves 0.6985 as the pivotal downside threshold supporting its positive 1–3 week view.

5.6/10: Warsh Balances Investment Surge and AI Risks With Data-Led Fed Policy

A 5.6/10 FXS Speechtracker score places Fed Chair Warsh’s speech modestly below the historical average of 6.1/10. Despite optimism about structural growth and an investment surge, his tone remains cautious and shaped by past crises. Describing himself as “over-scarred from the global financial crisis” points to continued vigilance over financial stability and tail risks. Warsh also stresses policy-driven investment strength while declining to prejudge the October and December meetings, leaving the Dollar’s rate outlook firmly dependent on incoming data. His treatment of AI spans a near-term demand shock, a means of improving data and monetary policy, and a possible but uncertain source of employment disruption. Markets will interpret that forward-looking awareness of risk as favouring gradual policy adjustment rather than aggressive tightening.

At 127.51, the FXS Fed Sentiment Index remained elevated after a 0.00-point move. The unchanged reading indicates a clearly hawkish overall policy tone, notwithstanding the slightly softer FXS Speechtracker result. Its position well above 100 continues to indicate a bias towards restrictive policy. Talk of an investment surge, alongside hopes for AI-led productivity gains, should preserve expectations supportive of the Dollar. That remains the case even as Warsh stresses that incoming data will shape key decision points later this year.

100-Day SMA Caps AUD/USD: Technical Analysis

Trading below the 100-day simple moving average (SMA) leaves AUD/USD under short-term pressure on the daily chart. The broader outlook remains constrained, although the latest Relative Strength Index (14) reading of 52 suggests momentum is stabilising rather than showing clear strength. The price also sits beneath the upper Bollinger Band but above the middle band, pointing to consolidation in the lower half of the recent volatility envelope.

The first upside hurdle is the 100-day SMA at 0.7035. Beyond it, the upper Bollinger Band near 0.7045 could attract renewed selling. Initial downside support lies around 0.6978 at the middle Bollinger Band. The lower band near 0.6915 offers a further cushion and defines the bottom of the current trading range.

(The technical analysis of this story was written with the help of an AI tool. Find out more.)