AUD/USD experiences slight declines, hovering around 0.7120 during the early of Monday’s Asian session. Expectations surrounding Fed rate hikes lend support to the US dollar, presenting a challenge for the pair. Market participants are closely monitoring the upcoming Australian employment figures and the scheduled summit between Trump and Xi later on Thursday. The AUD/USD pair is experiencing slight declines, hovering around 0.7120 in the early hours of the Asian session on Monday. The US dollar edges higher against the Australian Dollar as the US Federal Reserve delivered a 25-basis-point rate hike and flagged more hikes in the coming months. Last week, the Fed raised the interest rates by a quarter point, its first hike in three years, as officials sought to curb inflation. Fed Chair Kevin Warsh said that “the plain fact is that inflation is too high and has been for too long.” He added that “This summer’s inflation readings do not tell me that underlying trends have meaningfully improved.” Markets are currently assigning a probability of approximately 56.5% to the likelihood of an additional US rate hike during the Fed’s upcoming meeting in October, a notable increase from the nearly 42.5% observed just a week prior, as indicated by the CME FedWatch tool.
Market participants prepare for the forthcoming Australian employment data scheduled for release on Thursday. The Unemployment Rate is anticipated to hold steady at 4.5% in August, with an expected increase of 20,000 in the number of employed individuals in Australia during this timeframe. Any signs of improvement in the Australian labour market could bolster the Australian dollar against the US dollar in the near term. US President Donald Trump and Chinese President Xi Jinping are set to convene in Washington this Thursday to deliberate on the US–China tariff truce. This event will be closely monitored by market participants. Strategists note that their “1-3 weeks view” on AUD/USD remains intact despite the latest volatility. They recall that on Tuesday, 15 September, with spot at 0.7135, they had highlighted 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.” After the pair subsequently fell and closed at 0.7087, UOB reiterated yesterday (17 September, spot at 0.7090) that AUD “is expected to drop to 0.7050.” While the bank concedes that “we did not expect the subsequent strong rebound,” they stress that they “will maintain our view as long as AUD holds below 0.7140 (no change in ‘strong resistance’ level).”
In UOB’s assessment, “a breach of 0.7140 would mean the decline from early this week … has stabilised,” effectively signalling that the recent downside phase has run its course. Fed’s Schmid conveyed a notably hawkish message, achieving an FXS Speechtracker score of 8/10, surpassing the speaker’s established baseline of 7.2/10. Emphasising that the recent rate hike was a step toward restoring inflation to the 2% target, Schmid highlighted that price pressures are running above 3% and are broad-based rather than confined to energy, even as the broader economy and labour market are characterised as solid and balanced. The FXS Fed Sentiment Index increased by 0.42 points to 152.09, underscoring a distinctly hawkish position significantly above the neutral threshold of 100. The combination of an elevated FXS Speechtracker score and a higher FXS Fed Sentiment Index underscores a Federal Reserve communication tilt that bolsters further dollar resilience as markets adjust to a more enduring restrictive policy trajectory.
In the daily chart, AUD/USD exhibits a slightly bullish near-term inclination as the spot price moves above the 100-day simple moving average and the lower Bollinger band. However, the price remains below the 20-day Bollinger SMA at approximately 0.7164, which continues to limit the upside for the time being, while the Relative Strength Index (14) around 48 suggests a consolidative rather than an impulsive momentum. On the topside, initial resistance emerges at the Bollinger middle band near 0.7165, with a subsequent barrier at the upper band around 0.7235. On the downside, immediate support is identified at the recent pivot zone around 0.7120, followed by the lower Bollinger band at 0.7091 and the 100-day SMA near 0.7078; a daily close below this cluster would undermine the constructive bias and open the door to deeper retracements.
