Australian Dollar bulls run into Oil wall amid looming Fed decision

• AUD/USD stalls near 0.7220 as Oil-driven Dollar demand returns.
• Geopolitical flare-up keeps Fed hike pricing near 63%.
• US CPI and PPI now hold key to September decision.

The Aussie Dollar finished Tuesday’s session flat after bouncing off daily lows of 0.7204 but failed to sustain its gains as higher oil prices pushed the Greenback higher, leaving the Aussie Dollar nearly flat, according to the US Dollar Index (DXY). At the time of writing, the AUD/USD trades at 0.7219.

AUD/USD stalls as geopolitical Oil risks revive Dollar support before CPI

Geopolitics continued to drive price action, following attacks on US Navy vessels on Iranian Oil vessels in retaliation for attacks on warships. Consequently, inflationary pressures are building, favouring the Greenback as most investors eye a 0.25% rate hike by the Federal Reserve next week.

Data-wise, the NY Fed Survey of Consumer Expectations revealed that households expect a dip in three- and five-year inflation expectations in August.

The NFIB Small Business Optimism Index fell to 98.7 in August, but it remained above the long-term average of 98.0. One third of the companies expect to raise prices in August, while 28% project price increases.

A scarce economic docket in the US and Australia sets the stage for US inflation data on the producer and consumer sides. ANZ economists said that “another month of encouraging inflation data would give the FOMC enough confidence to hold rates steady in September, it is an open question as to whether ongoing geopolitical uncertainty will undermine the confidence of policymakers.“

If July’s data—especially the Consumer Price Index (CPI) forecasted at 0.4% MoM or 3.4% YoY, and core figures projected at 0.2% MoM and 2.4% YoY—surpasses these expectations, it could lead to additional tightening measures. This, in turn, might prompt traders to bid up the Greenback, as their price in a hawkish Fed.

Data from Prime Terminal sees a 63% chance that the Fed will raise rates by a quarter of a percentage point at the September 15-16 meeting.

AUD/USD Price Forecast: Technical Outlook

In the daily chart, AUD/USD trades at 0.7220, keeping a constructive near-term bias as it holds well above the clustered 50-, 100- and 200-day Simple Moving Averages (SMAs) around 0.7051 and rides a series of rising trend-line supports. The Relative Strength Index (RSI) at about 68 sits just shy of overbought territory, suggesting upside momentum remains firm but could be prone to a pause or shallow consolidation after the recent advance.

On the downside, initial support emerges at the horizontal level near 0.7198, with the SMA triple cluster around 0.7051 reinforcing a broader demand zone backed by multiple upward-sloping trend lines from the mid-0.68s–0.69s. While no precise topside resistance levels are defined on this setup, the broader structure hints that dips are likely to be bought as long as price holds above 0.7198 and, more importantly, above the 0.7050 region.

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