AUD/USD advances to approximately 0.6985 during the early hours of Monday’s Asian session. In October, the Consumer Sentiment Index experienced a decline, registering at 46.3 compared to the previous figure of 48.1. The likelihood of the RBA increasing interest rates in November has significantly diminished following the most recent CPI data. The AUD/USD pair is experiencing slight increases, hovering around 0.6985 in the early hours of the Asian trading session on Monday. Softening US consumer sentiment weighs on the US dollar against the Australian dollar. Traders will monitor the Minutes of the Reserve Bank of Australia meetings, scheduled for release on Tuesday. The University of Michigan’s Consumer Sentiment Index decreased to 46.3 in October, down from 48.1 in September. This figure arrived below the market expectations of 47.6. Nonetheless, UoM inflation expectations increased, solidifying anticipations for a 25 basis points Fed rate hike at its forthcoming meeting. Markets are currently assigning a probability of 17.7% for a Federal Reserve rate increase of at least 25 basis points this month, a decrease from the previous week’s figure of 24.4%, as reported by CME Fedwatch.
Investors are assigning an 84.1% probability to a rate hike at the central bank’s December meeting. On the Australian front, market participants scaled back their expectations for a rate hike by the Reserve Bank of Australia in the upcoming November policy meeting, following the release of the latest Consumer Price Index, which met forecasts. Former RBA board member Ian Harper indicated that a further interest rate hike this year is “plausible,” though not necessarily probable. Money markets are currently anticipating that the Australian central bank will probably maintain its interest rates at the upcoming meeting in early November. The probability of an interest rate increase has decreased to approximately 20%, based on market data from LSEG. Strategists highlight that “solid 10yr and 30yr Treasury auctions over consecutive days show there is a level where buyers step in,” helping to steady the rates backdrop after recent turbulence. They note that “Treasury volatility, tracked by the MOVE index, was at the epicentre of the recent global rate volatility before it was overtaken by French government bond volatility,” underscoring how the focus has shifted away from US duration. Looking ahead, OCBC argues that “the recent turn lower in the MOVE index, if sustained, should prevent the wobbling of risk-sensitive currencies like AUD and EM carry trades from turning into a deeper sell-off,” suggesting a more supportive environment for high-beta FX and carry positions.
Fed’s Musalem delivered a clearly hawkish message, with a FXS Speechtracker score of 7.3/10, marginally above the 7.2/10 historical average and signaling a tone slightly firmer than the established baseline. The emphasis that “more monetary policy firming will be required” to bring inflation back to 2% in a timely manner, alongside comments that the economy is “pretty strong” and the job market “balanced and stable,” underscores a bias toward additional rate hikes even as Musalem claims to go into meetings with an open mind. Musalem’s focus on persistent demand pressures, supply shocks, and structurally higher real yields driven by strong capital demand and AI investment points to a view that policy rates may need to stay higher for longer to keep inflation expectations anchored and protect the Dollar’s yield advantage. The FXS Fed Sentiment Index decreased by 0.25 points to 138.33, suggesting a slight retreat in perceived hawkishness, although the speech continues to align with a tightening stance. With the index significantly exceeding the neutral 100 mark, the Federal Reserve continues to be perceived as hawkish overall. Musalem’s comments regarding the consideration of rate increases and the prospect of structurally higher rates bolster that perspective, even as the slight shift in the index indicates some moderation at the margin.
In the daily chart, AUD/USD exhibits a bearish near-term bias as the price remains below the 100-day simple moving average and the 20-day middle SMA of the Bollinger Bands, which continues to limit the broader tone following the recent decline from the 0.72 area. The Relative Strength Index (14) at 40.9 remains below the midline, indicating persistent downside pressure rather than oversold conditions. Meanwhile, the lower Bollinger band near 0.6889 signifies the next volatility floor beneath the market. On the topside, initial resistance emerges at the Bollinger middle band around 0.7020, followed by the 100-day SMA at 0.7045, a zone that would need to be reclaimed to ease the current bearish tone, with a more distant hurdle at the upper Bollinger band near 0.7155. On the downside, the only nearby structural support is observed at the lower Bollinger band at 0.6890. A breach of this level would pave the way for a more significant decline, whereas maintaining a position above this band would indicate a consolidation phase within the ongoing downtrend.
