0.7000 test: Australian Dollar faces risk aversion as RBA rate hike approaches

• 0.7000 in focus as AUD/USD struggles amid weaker Asian equities and subdued sentiment.
• 25 basis points: RBA expected to raise rates to 4.85%.
• 72% Fed hike probability as WTI Oil slumps 6.50%.

AUD/USD opened the week lower at around 0.7000. The daily chart shows the Australian Dollar losing ground against the US Dollar as investors prepare for the Reserve Bank of Australia (RBA) monetary policy decision following upbeat US economic data.

0.7000 in focus: AUD/USD under pressure despite softer US Dollar ahead of RBA meeting

Asian equities came under pressure as US technology shares slipped following Apple’s earnings, prompting a shift towards risk aversion. Earlier optimism had centred on speculation that the US-Iran conflict could be resolved. Newswires reported that Iranian hardliners had authorised Iranian President Pezeshkian to enter talks, while Trump said he would not launch a strike after the election.

October’s ISM Manufacturing PMI rose to 55.5 from 54.5, exceeding the 54.6 forecast. Although the inflation sub-component eased, it stayed in expansionary territory. Money markets nevertheless reduced the probability of a 25-basis-point rate increase to 72% from 80% a week earlier, according to the CME FedWatch Tool.

Lower US Treasury yields weighed on the Greenback, with the US Dollar Index (DXY) down 0.17% at 101.78. The index tracks the US currency against its peers.

A sharp decline in Oil prices was cited as the driver of the retreat, signalling that near-term inflationary pressure could moderate. On Monday, the US crude benchmark West Texas Intermediate (WTI) dropped 6.50% to $96.25 per barrel.

The forthcoming US Job Openings and Labour Turnover Survey (JOLTS) will be key to gauging current labour market conditions. Factory Orders are also due, with growth forecast to accelerate to 1.2% in September from 0.1% in August.

LSEG data indicate that the Reserve Bank of Australia (RBA) is expected to raise interest rates by 25 basis points to 4.85%, with no further increases anticipated this year or next year. Following the decision, attention will turn to Governor Michele Bullock’s press conference for signals on the rate outlook.

In a research note, ANZ analysts wrote: “The post-meeting communication will likely focus on the hard choices the RBA faces in a world of supply shocks and constrained capacity.”

The analysts also expect the unemployment rate to be revised upwards and the RBA to lift its forecasts to account for the trimmed-mean inflation reading.

0.6996 in Focus: AUD/USD Price Forecast and Technical Outlook

At around 0.6996 on the daily chart, AUD/USD retains a bearish short-term bias below the cluster of simple moving averages near 0.7063. A retreat beneath the latest uptrend-line break at 0.7117 indicates that recent efforts to establish a base have faltered. Meanwhile, the Relative Strength Index (14) stands at 46, pointing to neutral-to-weak momentum rather than clearly oversold conditions.

The simple moving average zone near 0.7063 provides the first resistance, ahead of the reclaimed uptrend-line break around 0.7117. A firmer ceiling lies at the horizontal barrier near 0.7198. Initial support sits at the rising trend-line break around 0.6922. Further down, structural demand is concentrated near the origins of earlier rising trend lines in the 0.6897–0.6833 range, where buyers would likely try to curb additional losses.

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