AUD/USD has declined to approximately 0.6970 during the early hours of Wednesday’s Asian session. The RBA is expected to maintain its current interest rates in November, with a further increase appearing improbable at this time. Markets are anticipating a rate hold from the Fed at its forthcoming October meeting. The AUD/USD pair has decreased to approximately 0.6970, interrupting a three-day winning streak during the early Asian session on Wednesday. The Australian Dollar softens against the US Dollar as bets of the Reserve Bank of Australia decline. Traders are anticipating the release of the Minutes from the Federal Open Market Committee later on Wednesday, seeking further insights into the future direction of policy. The likelihood of the RBA increasing interest rates in November has diminished significantly following the recent Consumer Price Index data, which aligned with projections. 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 a rate increase has decreased to approximately 20%, based on market data from LSEG.
Federal Reserve Kansas City Fed President Jeff Schmid stated on Tuesday that the central bank must continue to increase its policy rate to combat inflation, despite the fact that elevated long-term yields are impacting activity in certain sectors of the economy. Later on Wednesday, the Federal Reserve will release the Minutes from its policy meeting held on September 15-16, during which it raised interest rates to address inflationary pressures. Comments from Federal Reserve officials appeared to adopt a less aggressive stance in light of the recent Personal Consumption Expenditures inflation data, which fell short of expectations, alongside weaker employment figures from the previous week. “There seems to be a little bit less urgency on the Fed to hike rates after the softer PCE and then the nonfarm payroll reports recently,” said Gavin Friend. Strategists note that their 1-3 week view on AUD/USD remains shaped by the prior downswing that began in mid-September, but they stress that “while the weakness that started in the middle of last month … remains intact, given the deeply oversold conditions, any further decline may fall short of the next major support at 0.6866.” They add that “downward momentum is starting to slow,” and reiterate that a decisive move through “0.6985 (no change in ‘strong resistance’ level) would indicate that 0.6866 is out of reach,” marking a shift away from the previously targeted downside.
Fed’s Schmid delivers a distinctly hawkish tone, with an 8/10 FXS Speechtracker score that is modestly stronger relative to the historical average of 7.5/10. The emphasis that the labour force “remains in a good place” alongside frustration with stubborn inflation and the assertion that AI is now one of the largest drivers of inflation underscores a view that price pressures are both persistent and structurally evolving. By emphasising that the Fed’s credibility is at stake and that “work remains to be done on the short rate” despite higher long-term yields, the speech reinforces expectations for a prolonged period of restrictive policy, which is supportive of the Dollar and presents a headwind for risk-sensitive assets. The FXS Fed Sentiment Index increased by 0.34 points to 137.91, maintaining its position in hawkish territory significantly above the neutral threshold of 100, which aligns with the heightened FXS Speechtracker reading. This combination of a higher index level and a strong speech score indicates that Fed communication is increasingly leaning toward a sustained tightening resolve, a context that is likely to continue supporting the Dollar against lower-yielding counterparts.
In the daily chart, AUD/USD exhibits a bearish near-term bias as the spot remains below both the 100-day simple moving average and the 20-day middle simple moving average of the Bollinger Bands, thereby maintaining the broader topside structure as resistance. The Relative Strength Index (14) at 36.6 remains slightly above the oversold threshold, indicating ongoing selling pressure rather than a definitive conclusion to the downtrend. On the topside, initial resistance appears in a narrow range surrounding the Bollinger middle band at 0.7050 and the 100-day SMA at 0.7055, with a more remote obstacle at the Bollinger upper band close to 0.7205. On the downside, the Bollinger lower band at 0.6895 presents the next significant support level, and a decisive breach below this threshold would likely pave the way for an extension of the ongoing bearish trend.
