Australian Dollar holds above 0.7000 vs recovering USD; remains close to monthly top

• AUD/USD lacks a firm intraday direction on Friday amid a combination of diverging forces.
• A hawkish RBA acts as a tailwind for the Aussie, while modest USD strength caps the pair.
• The focus now shifts to the FOMC meeting and crucial US macro releases, due next week.

The AUD/USD pair struggles to capitalize on the previous day's bounce from sub-0.7000 levels and seesaws between tepid gains/minor losses during the Asian session on Friday. Nevertheless, spot prices seem poised to register strong weekly gains and remain close to the monthly high, touched on Thursday amid a supportive fundamental backdrop.

The recent hawkish comments from Reserve Bank of Australia (RBA) officials continue to act as a tailwind for the Australian Dollar (AUD). In fact, RBA Assistant Governor Christopher Kent said earlier this week that there are reasonable indications that neutral rates are increasing both domestically and globally. Furthermore, RBA Deputy Governor Andrew Hauser warned on Thursday that Q3 trimmed-mean inflation may run hotter than expected, keeping rate hike expectations alive ahead of the November 3 policy meeting.

Adding to this, China's better-than-expected GDP print, showing that the economy grew by 4.5% year-on-year in the third quarter compared to 4.3% in the second quarter, turns out to be another factor lending some support to the Aussie. Meanwhile, the US Dollar (USD) attracts some buyers and stages a modest recovery from a three-week low, touched on Thursday. This holds back traders from placing fresh bullish bets on the AUD/USD pair, warranting caution before positioning for an extension of a one-week-old uptrend.

Federal Reserve (Fed) officials recently signaled that there is no urgency to raise interest rates. Traders, however, are still pricing in around an 80% chance that the US central bank will raise borrowing costs again in December. Moreover, oil-driven inflation fears underpin prospects for further Fed tightening. This, along with persistent geopolitical uncertainties stemming from escalating tensions in the Middle East and the US-Iran standoff, helps revive demand for the safe-haven buck and caps the upside for the AUD/USD pair.

Traders also seem hesitant and opt to wait for more cues about the Fed's policy path before placing fresh directional bets. Hence, the focus will be on the outcome of a two-day FOMC policy meeting, due next Wednesday. Apart from this, next week's important US macro releases – the Advance Q3 GDP print and the Personal Consumption Expenditures (PCE) Price Index – will play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the AUD/USD pair.

AUD/USD daily chart

Technical Analysis

The AUD/USD pair keeps capped tone beneath the 100-day Simple Moving Average (SMA) at 0.7033 and a dense Fibonacci cap between the 38.2% retracement at 0.7028 and the 50.0% level at 0.7069. The pair’s inability to reclaim this cluster of overhead technical barriers suggests rallies remain vulnerable, with sellers defending the downtrend from the 0.7242 swing high.

On the downside, initial support emerges at the 23.6% Fibo. retracement at 0.6977, with a deeper floor at the 0.6896 swing low, where buyers would be expected to show more robust interest if the current decline extends.

(The technical analysis of this story was written with the help of an AI tool. Know more.)