Aussie Dollar’s 0.70 rally falters as Fed, RBA inflation tests loom

• A firmer Greenback weighs on AUD/USD, leaving the pair 0.26% lower at 0.7016.
• Market sentiment improves as Middle East diplomacy drives Oil prices down.
• Monetary policy expectations could shift with Australian inflation data and the Fed’s decision.

Positive risk sentiment failed to support the Australian Dollar on Monday, with the currency losing over 0.26% despite Wall Street closing higher. The prospect of an easing in the US-Iran conflict drove energy prices down. Broad-based US Dollar gains kept the Aussie under pressure, notwithstanding expectations that Australia’s central bank will raise interest rates towards the end of the year. AUD/USD stands at 0.7016.

Can RBA rate-hike expectations support AUD/USD as USD strength outweighs risk appetite?

The Federal Reserve (Fed) will be the main focus among the three major central banks announcing monetary policy decisions this week. Rates are expected to remain unchanged at Wednesday’s Fed meeting. Although money markets have priced in a rate hike, the Greenback could weaken if Fed Chair Kevin Warsh delivers a dovish message at his press conference.

Oil prices declined on geopolitical developments, with reports indicating that Mecca Pact members Iran, Turkey, Pakistan, and Saudi Arabia had agreed to carry on with talks. However, speculation about a coordinated US-Israeli strike on Tehran continues after Iranian officials ruled out nuclear discussions at the pact’s reunion.

With no economic releases on the US calendar, attention turns to Tuesday’s Durable Goods Orders, the ADP Employment Change 4-week average and Conference Board (CB) Consumer Confidence.

Australia’s economic calendar resumes on Wednesday, when Reserve Bank of Australia (RBA) Governor Michele Bullock is due to speak and Australian inflation figures will be released. September’s Trimmed Mean CPI is forecast at 0.3% MoM, a tenth above the 0.2% rise recorded in August. An annual reading exceeding August’s 3.6% could open the door to a further rate increase.

AUD/USD Price Forecast: What does the technical outlook indicate?

Trading at 0.7016 on the daily chart, AUD/USD retains a bearish short-term bias below a cluster of simple moving averages (SMA) around 0.7073. Several rising trend lines also sit above the pair, with the line crossing near 0.7103 now providing overhead resistance. Meanwhile, a Relative Strength Index (RSI) reading of 50.6 signals neutral momentum, offering little evidence of a firm directional bias.

Any recovery would first encounter resistance at the SMA cluster near 0.7073, before the short-term trend-line barrier at 0.7103 and the more significant horizontal ceiling at 0.7198. Further structural resistance lies at 0.7453, 0.8968 and 0.9941. Below current levels, the rising trend line around 0.6919 offers initial support. The next deeper structural base is near 0.6354, the price at which the longer-term descending trend line was broken.

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