Hot CPI lifts Australian Dollar to fresh one-month high; gains capped by firmer USD ahead of FOMC

• Buying interest in AUD/USD extends into a second day, but further gains remain elusive.
• The AUD receives a sizeable lift as strong Australian CPI data strengthen expectations of an RBA rate hike.
• Ahead of the crucial FOMC decision, a rise in the USD to a two-week high limits the pair's upside.

Buying interest pushes AUD/USD higher for a second consecutive day on Wednesday, with the pair reaching its highest level since September 23 around 0.7050-0.7055 in Asian trading after stronger-than-expected Australian consumer inflation data. A break above the key resistance at the 100-day Simple Moving Average (SMA) now appears confirmed. However, bullish traders may hold back from aggressive positions until the outcome of the two-day FOMC meeting.

September's headline Consumer Price Index (CPI) increased by 0.8%, according to the Australian Bureau of Statistics (ABS), exceeding both the previous month's 0.4% rise and the consensus forecast of 0.7%. Annual inflation also picked up, reaching 4.3% from 4.0% in August and surpassing expectations of 4.2%. With annual trimmed mean inflation still above the Reserve Bank of Australia's (RBA) 2-3% target, expectations of an imminent November interest rate hike were reinforced, lending modest support to the Australian Dollar (AUD).

Gains in AUD/USD are nevertheless being restrained by a stronger US Dollar (USD), which has climbed to a two-week high. Markets increasingly accept that the Federal Reserve (Fed) will raise borrowing costs again before the year-end, given the inflation risks posed by elevated oil prices. Lingering geopolitical uncertainty is also supporting the safe-haven dollar, extending its advance to a fourth consecutive day. Attention now turns to the much-awaited FOMC rate decision, scheduled for later in the US session, as a key driver of USD demand.

With the US central bank widely expected to keep interest rates on hold, investors will examine the policy statement and Fed Chair Kevin Warsh's remarks at the post-meeting press conference for further guidance on the policy outlook. Until then, the supportive fundamental factors outlined above appear to favour AUD/USD bulls. This suggests that any sizeable corrective decline is more likely to attract buyers and remain contained.

Can AUD/USD sustain its daily-chart recovery?

Can AUD/USD Hold Support Below Fibonacci Resistance?

An overhead cluster of Fibonacci retracement levels is restricting AUD/USD, even as the pair trades just above its 100-day Simple Moving Average (SMA). Momentum in the rebound from recent lows is fading, with prices remaining below the 50% retracement at 0.7066 and the 61.8% retracement at 0.7106. Despite nearby moving-average support, the wider bias therefore remains neutral to mildly bearish.

The first downside cushion lies at the 100-day SMA of 0.7033, reinforced by the 38.2% retracement at 0.7025. Should this support cluster give way, the 23.6% retracement at 0.6975 would come into focus, followed by the risk of a deeper decline towards the structural base near 0.6893.

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