AUD/USD drifts higher to near 0.6810 in Friday’s early Asian session. Hawkish remarks from Federal Reserve officials have heightened market expectations for a rate increase in December. Market participants are anticipating the release of the US October PPI data on Friday, seeking new momentum for their trading strategies. The AUD/USD pair moves upward to approximately 0.6810 in the early Asian session on Friday. However, the potential upside for the pair may be constrained in light of a hawkish posture from the US Federal Reserve. The US October Producer Price Index data is set to be released later on Friday. The Reserve Bank of Australia increased its cash rate by 25 basis points, reaching an 18-year peak of 4.85% earlier this month. Markets perceive that the Australian central bank is probably done with rate increases, leading to an expanding policy divergence with the Federal Reserve.
Bets on a 50-basis-point Fed rate hike in December began to increase following a stronger-than-anticipated US inflation report and remarks from Fed governor Christopher Waller. Waller indicated his support for a quarter-point rate increase in December and suggested he might advocate for a half-point adjustment should inflation data exceed expectations. The US October PPI inflation data will be the focus of attention on Friday. Economists anticipate that the headline PPI will reflect a year-over-year increase of 6.6% in October, whereas the core PPI is expected to demonstrate a 5.0% year-over-year rise during the same reporting period. Any indications of increased inflation in the US may strengthen the US Dollar against the Australian Dollar. Analysts highlight that November inflation expectations in Australia “stayed at 5.3%, so over double the RBA’s mid-point target,” underscoring the persistence of elevated price pressures that will remain central to upcoming RBA policy deliberations and Australian Dollar sentiment.
Fed’s Williams presents a tone that is moderately more hawkish compared to historical averages, achieving a 7/10 on the FXS Speechtracker, in contrast to the baseline score of 6.1/10. The emphasis on a resilient, robust US economy alongside “stubbornly persistent” and “too elevated” inflation highlights that the central bank continues to perceive a necessity to tighten or uphold restrictive policy over time to bring inflation back to 2%. This also clarifies that monetary policy aims at targeting inflation rates rather than reducing overall price levels to prevent adverse economic conditions. Overall, the speech underscores a narrative of continued policy efforts in the future rather than indicating an immediate shift. The FXS Fed Sentiment Index declined by 0.08 points to 147.47, suggesting a minor retreat in perceived hawkishness while still remaining well above the neutral threshold of 100. This combination suggests that, despite a marginal moderation in tone, the broader Fed communication backdrop still resides in clearly hawkish territory, consistent with Williams’ message of persistent inflation and the need for further policy adjustment.
In the daily chart, AUD/USD maintains a bearish near-term outlook as the spot price remains below the 100-day Simple Moving Average and the 20-day Bollinger midline. The pair is positioned slightly above the lower Bollinger Band, which currently offers initial support at 0.6805. Meanwhile, the Relative Strength Index (14) at 33.41 is nearing oversold territory, indicating that while downside pressure persists, it may be somewhat extended. On the topside, immediate resistance is positioned at the 20-day Bollinger SMA near 0.6962, while the 100-day SMA at 0.7025 serves to reinforce a broader cap ahead of the upper Bollinger Band around 0.7119. On the downside, a clear break below the lower Bollinger support at 0.6805 would open the door to further losses, whereas a daily close back above the 0.6962 region would be needed to ease the current bearish bias and signal scope for a corrective rebound.
