Australian Dollar eases from recent high as RBA rate hike expectations strengthen ahead of CPI

• A 0.24% decline leaves the Australian Dollar above 0.7000 on Monday, following its rise to a one-month high.
• Increasing expectations of a further Australian interest rate rise could cushion the Aussie's decline.
• Wednesday brings Australian inflation data and the Federal Reserve's monetary policy decision, both awaited by investors.

A daily loss of 0.24% leaves AUD/USD trading near 0.7015 at the time of writing on Monday. Having touched a one-month high earlier in the session, the pair has pulled back as investors turn cautious before this week's major economic events.

Rising expectations that the Reserve Bank of Australia (RBA) will raise interest rates again at its forthcoming November monetary policy meeting could underpin the Australian Dollar (AUD).

Recent hawkish remarks by RBA Assistant Governor Sarah Hunter have bolstered those expectations. Warning that inflation was not yet fully under control, she suggested further rate rises might be required, particularly given the risk that international inflationary pressures could become embedded in Australia's economy.

Wednesday's Australian Consumer Price Index (CPI) release is therefore under close scrutiny. An inflation reading above expectations could strengthen the case for additional RBA monetary tightening and lend further support to the Australian Dollar. A more pronounced easing in price pressures, by contrast, could dampen expectations of a rate rise and put the currency under pressure.

A daily loss of 0.24% leaves AUD/USD trading near 0.7015 at the time of writing on Monday. Having touched a one-month high earlier in the session, the pair has pulled back as investors turn cautious before this week's major economic events.

Rising expectations that the Reserve Bank of Australia (RBA) will raise interest rates again at its forthcoming November monetary policy meeting could underpin the Australian Dollar (AUD).

Recent hawkish remarks by RBA Assistant Governor Sarah Hunter have bolstered those expectations. Warning that inflation was not yet fully under control, she suggested further rate rises might be required, particularly given the risk that international inflationary pressures could become embedded in Australia's economy.

Wednesday's Australian Consumer Price Index (CPI) release is therefore under close scrutiny. An inflation reading above expectations could strengthen the case for additional RBA monetary tightening and lend further support to the Australian Dollar. A more pronounced easing in price pressures, by contrast, could dampen expectations of a rate rise and put the currency under pressure.

Lower US Treasury bond yields and hopes that Middle East tensions will ease are restraining demand for the US Dollar (USD), which is struggling to build on Friday's modest rebound from a three-week low. Nevertheless, continuing geopolitical uncertainty could revive safe-haven demand for the Greenback.

Also in focus is the Federal Reserve (Fed) monetary policy announcement on Wednesday, at the conclusion of the two-day Federal Open Market Committee (FOMC) meeting. Guidance on the future course of interest rates will receive close attention from investors.

Thursday adds to a busy US economic calendar with the advance estimate of third-quarter Gross Domestic Product (GDP) and the Personal Consumption Expenditures (PCE) Price Index. The latter is a key inflation measure watched closely by the Fed.

With the contrasting monetary policy outlooks in Australia and the US still in focus, these figures could alter expectations for US interest rates and spark fresh volatility in AUD/USD.

RBA hike risk rises as TD highlights hawkish turn and possible November increase

TD Securities says markets had been “under-priced for the risk of a follow-up hike”. Its own earlier commentary after the Minutes of the RBA’s September meeting had nevertheless retained a forecast of no further rate rises this year. A reassessment followed when TD’s team returned to the office and “listened to the Deputy Governor's fireside chat from last week and there is no confusion here - his comments were hawkish,” signalling a distinct change in tone.

The sequence of the remarks is important to TD, which emphasises that “the Deputy Governor's hawkish comments last week preceded this week's Q3 CPI,” adding that “the timing of this hawkish commentary runs counter to his hawkish commentary in March of this year and earlier last month that were delivered after strong data outcomes.” In its assessment, that sequence substantially alters the balance of policy risks ahead of the next meeting.

For the inflation release, TD Securities “forecast Q3 quarterly trimmed mean to print 0.92% q/q, above the Bank's 0.85% forecast.” Its analysts acknowledge that, “theoretically, this should be enough for the Bank to remain on hold at its November meeting given the Bank's decision to hike at its September meeting.” They nonetheless argue that “Deputy Governor Hauser's comments detailed above open up the real possibility the Bank uses its updated set of inflation forecasts in its November Statement on Monetary Policy to hike at that meeting.” TD therefore judges that “odds of the RBA hiking should be above 60% the market has currently priced.”

AUD/USD faces near-term resistance as broader uptrend holds

At 0.7018 on the one-hour chart, AUD/USD faces modest near-term constraints below both the 100-period simple moving average (SMA) at 0.7020 and horizontal resistance at 0.7040. Although the pair holds above the longer-term 200-period SMA at 0.6990, a Relative Strength Index (14) reading near 41 points to waning bullish momentum and a corrective bias. The broader upward trend, however, remains intact.

Initial support lies at 0.7013. Below that, the horizontal floor at 0.6994 and the 200-period SMA at 0.6990 form an important demand area for buyers to protect. Immediate resistance comes from the 100-period SMA at 0.7020, followed by a firmer barrier at 0.7040. A sustained move through those levels would alleviate the prevailing selling pressure and clear the way for higher highs on the hourly chart.

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