Australian Dollar inches higher against US Dollar as US flash PMI release approaches

• Broad Australian Dollar outperformance brings a modest gain against the US Dollar.
• A further RBA interest rate increase is anticipated by investors.
• Wednesday is expected to bring no change in interest rates from the Fed.

At around 0.7018 against the US Dollar (USD), the Australian Dollar (AUD) is slightly firmer in Friday’s European session. Firm expectations of another interest rate increase this year from the Reserve Bank of Australia (RBA) underpin the Australian Dollar’s outperformance, helping the Aussie pair edge higher.

Aussie advances as RBA inflation warning puts price data in focus

Comments by RBA Deputy Governor Andrew Hauser helped take AUD-USD to its highest level since late September. Commerzbank analysts say the Aussie “received further support from a significant rise in interest rate expectations,” following his remarks. Describing the inflation outlook as “materially worse” than the RBA had anticipated, Hauser also warned of a possible “de-anchoring of inflation expectations,” bringing forthcoming price figures into sharper market focus.

Survey findings cited by Hauser showed that “a growing share of businesses believe that inflation of 3-3.5% is ‘the new normal’,” according to Commerzbank. Against the RBA’s long-term inflation target of 2-3%, the bank describes this as “certainly be concerning,” especially given that “trimmed-mean inflation most recently stood at 3.6%, further above the target range.”

For Commerzbank, this setting “makes the inflation data due on 28 October all the more important.” The RBA’s August projections had already envisaged “headline inflation to fall to 3.6% and trimmed-mean inflation to 3.3% by December,” while the forthcoming figures “should at least provide indications that inflation is indeed moving in that direction.” However, the bank warns that if “price pressures remain similarly elevated or even intensify, however, this would validate the recent rise in rate-hike expectations and cement the risk of another rate move at the RBA’s meeting on 3 November.”

Due at 13:45 GMT, October’s preliminary United States (US) S&P Global PMI figures are the next focus for US Dollar investors. Further increases are forecast for both the manufacturing and services PMI, although the pace is expected to be moderate.

Having retested Thursday’s three-week low of 101.44, the DXY has recovered. At the time of writing, the USD Index is near 101.75, up 0.1%.

Next week’s monetary policy announcement from the Federal Reserve (Fed) will be the key forthcoming catalyst for the US Dollar. Expectations are for rates to remain within the 3.75%-4.00% range.

AUD/USD Holds a Mildly Bullish Technical Bias

Trading at 0.7019 on the daily chart, AUD/USD remains just above its 20-day exponential moving average (EMA) of 0.7001. By holding this dynamic support, the pair retains a modestly bullish near-term bias. Meanwhile, a Relative Strength Index (RSI) reading of 51.5 places it slightly above neutral. That suggests momentum is stabilising following the recent rebound from oversold territory, rather than signalling an outright impulsive rally.

The 20-day EMA near 0.7001 provides immediate downside support. The 0.7020/0.7020 zone, where today’s trading opened, serves as the nearby pivot; losing it would erode the positive bias and leave the pair vulnerable to deeper consolidation. As the current dataset offers no clear technical levels overhead, additional upside would likely require buyers to keep defending the EMA base and move the pair further from the 0.70 level, preserving the broader recovery structure.

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