AUD/USD edges higher to approximately 0.7025 during Tuesday’s Asian session. RBA’s Hunter indicates that the central bank is “not quite yet” finished addressing inflation. On Wednesday, attention will be focused on Australia’s CPI inflation data and the Federal Reserve’s decision regarding interest rates. The AUD/USD pair strengthens to approach 0.7025 during the Asian trading hours on Tuesday, supported by hawkish expectations regarding the Reserve Bank of Australia’s rate policy. Traders prepare for the release of Australia’s September Consumer Price Index inflation report later on Wednesday, coinciding with the US Federal Reserve’s interest rate decision. The RBA raised interest rates in late September to the highest level in 15 years at 4.6%. RBA Assistant Governor Sarah Hunter indicated that the central bank is “not quite yet” finished addressing inflation, suggesting that additional rate hikes are probable when policymakers convene early next month. “The board have put through four rate hikes this year to keep on tackling the challenge” of inflation, said Hunter. “Unfortunately, not quite yet.” And “I’m not going to front run what the board might or might not do with interest rates. All I do know is that they are committed to tackling inflation and getting inflation down,” Hunter added. Traders are poised to monitor the Australian inflation data released on Wednesday, seeking further insights into the trajectory of interest rates. The headline CPI is anticipated to demonstrate an increase of 4.2% year-over-year in September, compared to the previous figure of 4.0%.
In September, the CPI inflation is anticipated to rise to 0.7%, up from 0.4% in August on a monthly basis. Attention will pivot toward the Federal Reserve’s policy meeting later in the day. Analysts anticipate that the US central bank will maintain the current interest rate after the increase observed in September. However, expectations for another rate increase remain elevated, with markets pricing in a strong chance of an additional rate hike in December. Strategists maintain a constructive medium-term stance on AUD/USD, noting that they “turned positive on AUD last Wednesday (21 Oct, spot at 0.7005), indicating that AUD ‘could rise toward 0.7035.’” After that initial target was reached, they add that “after AUD tested 0.7035, we highlighted on Thursday (22 Oct, spot at 0.7025) that AUD ‘could advance further, though the next technical target at 0.7070 may not come into view so soon.’” UOB says it will “continue to hold the same view as long as 0.6985 (no change in ‘strong support’ level) is not breached,” reinforcing 0.6985 as the key downside level underpinning their 1–3 week positive bias. Fed Chair Warsh’s speech scores 5.6 out of 10 on the FXS Speechtracker, indicating a modest decline compared to the historical average of 6.1 out of 10. This score reflects a cautious, crisis-scarred tone, even as there is optimism regarding structural growth and a surge in investment.
The acknowledgement of being “over-scarred from the global financial crisis” emphasises a predisposition toward caution regarding financial stability and tail risks. This perspective is maintained even as Warsh points to the robustness of policy-driven investments and refrains from making premature judgements about the upcoming meetings in October and December, ensuring that the trajectory of the Dollar’s rate remains firmly anchored in data. Warsh’s emphasis on AI as a near-term demand shock, a mechanism for enhanced data and monetary policy, and a possible yet uncertain disruptor of employment introduces a forward-looking, risk-aware dimension that markets will interpret as favouring gradualism over aggressive tightening. The FXS Fed Sentiment Index remained stable, registering no change at a notably high level of 127.51. This indicates that the overarching policy stance continues to be distinctly hawkish, even in light of the marginally lower FXS Speechtracker score. With the index firmly above 100, the Fed’s stance continues to lean toward restrictive policy settings.
The combination of investment surge rhetoric and AI-driven productivity hopes should maintain Dollar-supportive expectations, even as Warsh emphasises data-dependent crystallising moments later this year. In the daily chart, AUD/USD continues to experience near-term pressure as it trades below the 100-day simple moving average, which limits the broader outlook despite the latest Relative Strength Index (14) reading at 52, suggesting a stabilisation of momentum rather than a clear indication of strength. Price is situated beneath the upper Bollinger Band, yet remains above the middle band, indicating a phase of consolidation within the lower segment of the recent volatility envelope. On the topside, initial resistance is positioned at the 100-day SMA at 0.7035, succeeded by the upper Bollinger Band near 0.7045, where selling interest may resurface. On the downside, immediate support is provided by the Bollinger middle band near 0.6978, ahead of a deeper cushion at the lower band around 0.6915, which marks the lower edge of the current trading range.
