AUD/USD Overview
AUD/USD increased by 0.13% on Tuesday, trading around 0.6980. The Australian Dollar (AUD) gained slightly from a small decrease in the US Dollar (USD), aided by falling US Treasury yields.
The 10-year US Treasury yield is hovering around 5.29%, having dipped to about 5.25% earlier. Still, it remains near the recent peak of 5.349% from Monday, marking its highest point since 2002. US yields stay elevated due to ongoing inflation concerns, worries about government debt, and the broader implications for fiscal sustainability, not to mention the anticipation that interest rates might stay high for an extended period.
In this context, the US Dollar Index (DXY), which measures the dollar’s value against six major currencies, has slipped to around 101.87 after reaching a new year-to-date high of 102.53 on Monday. The slight fall in Treasury yields is temporarily making the US Dollar less attractive.
On the monetary policy front, disappointing US data from last week has decreased the urgency for the Federal Reserve (Fed) to consider another interest rate hike during its upcoming meeting on October 27-28. Weaker Nonfarm Payrolls (NFP) and Personal Consumption Expenditures (PCE) inflation data have strengthened the view that the Fed might pause its tightening approach in October.
As per the CME FedWatch tool, there’s approximately a 78% chance that the Fed will maintain current interest rates in October. However, persistent inflation and the Fed’s goal to steer inflation back to its 2% target keep the door open for a potential rate hike in December. Investors are now looking forward to the Federal Open Market Committee (FOMC) Minutes scheduled for Wednesday for additional insights into the future of US interest rates.
On the Australian front, the outlook for further monetary tightening is rather modest. Data from LSEG suggests that there’s about a 20% chance the Reserve Bank of Australia (RBA) will increase interest rates in its November meeting, which limits supportive measures for the Australian Dollar. Consequently, AUD/USD is largely influenced by fluctuations in the US Dollar and US Treasury yields.
AUD/USD Technical Analysis
Looking at the four-hour chart, AUD/USD is trading at 0.6981, maintaining a bearish short-term outlook as it remains below both the 100-period simple moving average (SMA) at 0.7045 and the 200-period SMA at 0.7112. The pair is just above the horizontal support at 0.6965, with the Relative Strength Index (14) at 56.5 indicating a modest uptick in momentum that hasn’t yet pushed past the moving average barrier.
To the upside, initial resistance appears at 0.7020, followed by the 100-period SMA at 0.7045 and a horizontal resistance at 0.7075. Beyond that, the 200-period SMA at 0.7112 and additional resistance at 0.7140 form a wider supply zone. Meanwhile, a drop below 0.6965 could lead to the next support level at 0.6900, where buyers might attempt to stem any further decline.
