AUD/USD softens to near 0.6965 on Thursday. Minutes revealed that Fed officials supported the decision made in September to increase interest rates. Former RBA board member stated that a rate hike in November is “plausible.” The AUD/USD pair experiences a decline, reaching approximately 0.6965 during the Asian trading hours on Thursday. The US Dollar strengthens against the Australian Dollar after hawkish Minutes from the Federal Open Market Committee. The US weekly Initial Jobless Claims report and the Fedspeak will serve as the focal points later in the day. According to meeting minutes released Wednesday, Federal Reserve officials anticipate they will hike interest rates again before the end of the year to address inflation that has exceeded target levels for over five years. “The FOMC’s minutes reinforced the hawkish tone accompanying the Fed’s September rate hike, with most participants still viewing further tightening as appropriate and almost all seeing inflation risks tilted to the upside at the time of the meeting,” said Westpac analysts.
Last month, Fed policymakers made the decision to increase the target range for their benchmark rate by 25 basis points to a range of 3.75% to 4%. This marks the first increase since July 2023. Traders are currently estimating approximately a 22% likelihood of an additional quarter-point increase at the Federal Reserve’s October policy meeting, a decrease from about 70% observed in the aftermath of the September decision. Former Reserve Bank of Australia (RBA) board member Ian Harper stated that an additional interest rate hike this year is “plausible,” though not necessarily probable. Money markets are currently reflecting a 27% probability of a consecutive rate hike to 4.85% at the upcoming RBA Board meeting, as indicated by the ASX Rate Tracker. Strategists note that their previously negative view on AUD has faded as the recent sell-off lost momentum and key support levels held. They recall that from the middle of last month they had been bearish, but by last Friday, 02 Oct, with spot at 0.6930, they were already cautioning that “any further decline in AUD may fall short of the major support at 0.6866.”
By Monday, 05 Oct, with spot at 0.6970, UOB observed that “downward momentum is starting to slow, and a break above 0.6985 (no change in ‘strong resistance’ level) would indicate that 0.6866 is out of reach.” The Aussie subsequently rose through that level, reaching a high of 0.6990, confirming that the earlier downside target was unlikely to be tested in the near term. In light of this price action, UOB now adopts a neutral stance on AUD, expecting it “to trade between 0.6935 and 0.7020” over the coming 1–3 weeks, with the pair seen consolidating within this relatively tight range. Fed’s Schmid adopts a distinctly hawkish stance, achieving an 8/10 on the FXS Speechtracker, which is slightly above the historical average of 7.5/10. This emphasises the robustness of the labour market while characterising inflation as “frustrating” and in need of decisive action. The emphasis that AI is now one of the largest drivers of inflation, coupled with the warning that Fed credibility is at stake and that short rates may still need further tightening despite higher long-term yields, reinforces a message of persistent inflation risks and a willingness to keep policy restrictive.
The FXS Fed Sentiment Index increases by 0.34 points to 137.91, remaining solidly in hawkish territory and aligning with the marginally stronger-than-baseline tone of this speech. The elevated index level, significantly surpassing the neutral 100 mark, substantiates that Schmid’s remarks contribute additional hawkish pressure to expectations for the Dollar and the broader Fed policy pricing. In the daily chart, AUD/USD maintains a bearish near-term bias as the spot remains below the 20-period Bollinger middle band and the 100-day moving average. The pair is moving within the lower half of the recent range, with the Relative Strength Index (14) at 35.57 positioned just above oversold territory, suggesting that while downside momentum persists, it is not at an extreme level. On the downside, initial support aligns with the 20-period Bollinger lower band near 0.6890, where sellers could pause for consolidation. On the topside, immediate resistance emerges at the Bollinger middle band at 0.7040, followed by the 100-day moving average at 0.7050; a sustained break above these levels would be necessary to alleviate bearish pressure before the upper Bollinger band near 0.7190 becomes relevant.
