AUD/USD is showing resilience as it approaches 0.7090 during the early hours of Thursday’s Asian session. The Fed has opted to raise the benchmark rate to a range of 3.75% to 4.0% as of Wednesday. The IMF indicated that the RBA ought to be prepared to increase rates as necessary, highlighting the potential risks associated with inflation. The AUD/USD pair appreciates to approximately 0.7090 in the early hours of trading in Asia on Thursday. Market participants are actively evaluating the implications of the Federal Reserve’s interest rate increase alongside remarks made by US President Donald Trump. The US Initial Jobless Claims data is set to be released later on Thursday. The Fed raises the interest rates for the first time in three years to 3.75%-4.0% on Wednesday, as widely expected. Fed Chair Kevin Warsh said that the move was because “inflation is too high and has been for too long”, adding that it was a “sober” and “responsible decision.”
Warsh indicated that the rate may be raised further in an effort to curb escalating prices. Money markets have assigned an approximate 49.8% probability to a Federal Reserve rate increase in October, as indicated by the CME FedWatch tool. “That’s hawkish. If the chair thinks policy is accommodative, then you’ve got more work to do,” said Michael Gapen. Nonetheless, Trump demanded the US central bank slash interest rates to 1% “or less.” And “We are ‘carrying’ almost every country in the World, and that cannot go on any longer,” Trump wrote in a Truth Social post. The Reserve Bank of Australia has maintained the Official Cash Rate at 4.35%, after implementing three successive increases earlier this year. Markets are currently assigning approximately 76% probability to the Australian central bank increasing the Official Cash Rate to 4.60% at the forthcoming RBA Board meeting, as indicated by the RBA Rate Tracker.
The International Monetary Fund indicated that the RBA ought to be prepared to increase interest rates due to persistent inflation risks skewed toward the upside. Furthermore, it suggested that the government could aid in disinflation efforts by curtailing expenditure. Strategists at UOB Group maintain their cautious medium-term stance on AUD/USD, reiterating their “1-3 weeks view” that, “while further weakness is not ruled out, short-term conditions are oversold, and AUD must close below 0.7100 before a move to 0.7050 can be expected.” They add that the “likelihood of AUD closing below 0.7100 will remain intact as long as AUD holds below the ‘strong resistance’ at 0.7175,” with both levels unchanged from their prior assessment. In the daily chart, AUD/USD exhibits a bearish near-term bias as the price remains below the middle line of the 20-day Bollinger Bands, while the 100-day simple moving average provides initial underlying support just beneath the market.
Momentum has moderated, as indicated by the 14-day Relative Strength Index retreating into the low-40s. This suggests a decline in bullish momentum rather than signalling outright oversold conditions. On the topside, immediate resistance is observed at the lower Bollinger band near 0.7095, followed by the Bollinger SMA center around 0.7166 and the upper band close to 0.7240, creating a broad cap above current levels. On the downside, the 100-day SMA at 0.7080 represents the initial support level; a sustained breach below this threshold would likely pave the way for lower daily closes and strengthen the existing bearish sentiment.
