Australian Dollar hangs near three-week low, above 0.7100 as USD stands firm ahead of Fed

Source Fxstreet
  • AUD/USD attracts sellers for the second straight day amid a broadly firmer US Dollar.
  • Fed rate hike bets, elevated US bond yields and geopolitical risks underpin the USD.
  • Hawkish RBA expectations could support the Aussie as traders await the Fed decision.

The AUD/USD pair sticks to a negative bias for the second consecutive day and trades around the 0.7120 region during the early part of the European session on Tuesday. Spot prices, however, hold above an over three-week low, around the 0.7100 mark set on Monday, as traders seem hesitant ahead of the crucial two-day FOMC policy meeting, starting later today.

The US Federal Reserve (Fed) is scheduled to announce its decision on Wednesday amid rising rate hike bets, bolstered by last week's inflation figures. Hence, investors will closely scrutinize updated economic projections, which include the so-called dot plot, and Fed Chair Kevin Warsh's comments during the post-meeting press conference for more cues about the future interest rate path. This, in turn, will play a key role in influencing the US Dollar (USD) price dynamics and provide some meaningful impetus to the AUD/USD pair.

Heading into the key central bank event, market players seem convinced that the US central bank will stick to its hawkish stance amid inflation risks stemming from higher energy prices. The outlook pushes the yield on the benchmark 10-year US Treasury bond further beyond the 5.0% threshold for the first time since 2023 and acts as a tailwind for the USD. Apart from this, persistent geopolitical uncertainties stemming from intensifying US-Iran tensions underpin the safe-haven Greenback and weigh on the AUD/USD pair.

Meanwhile, a mixed batch of economic data reinforced concerns that China's economic recovery remains fragile. This turns out to be another factor exerting pressure on the China-proxy Australian Dollar (AUD). However, expectations that the Reserve Bank of Australia (RBA) will raise interest rates later this month on the back of stronger-than-expected economic growth and persistent domestic inflation could lend some support to the Aussie. This, in turn, warrants caution before placing fresh bearish bets on the AUD/USD pair.

AUD/USD daily chart

Chart Analysis AUD/USD

Technical Analysis

The AUD/USD pair holds a mildly bullish near-term bias above the 100-day Simple Moving Average (SMA) at 0.7080 and a dense Fibonacci support band clustered between the 38.2% retracement at 0.7093 and the 50.0% level at 0.7049.

Momentum, however, is softening, with the Relative Strength Index (RSI) easing toward the neutral 50 line and the Moving Average Convergence Divergence (MACD) slipping into negative territory, which hints that upside traction is waning even as spot prices remain supported.

On the topside, initial resistance emerges at the 23.6% Fibo. retracement at 0.7147, with a subsequent barrier at the recent cycle high near 0.7234.

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

Australian Dollar Price This week

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies this week. Australian Dollar was the strongest against the Japanese Yen.

USD EUR GBP JPY CAD AUD NZD CHF
USD 0.54% 0.43% 0.96% 0.24% 0.62% 0.93% 0.12%
EUR -0.54% -0.13% 0.43% -0.30% 0.08% 0.39% -0.42%
GBP -0.43% 0.13% 0.56% -0.17% 0.21% 0.52% -0.32%
JPY -0.96% -0.43% -0.56% -0.72% -0.39% -0.10% -0.87%
CAD -0.24% 0.30% 0.17% 0.72% 0.40% 0.68% -0.16%
AUD -0.62% -0.08% -0.21% 0.39% -0.40% 0.31% -0.51%
NZD -0.93% -0.39% -0.52% 0.10% -0.68% -0.31% -0.84%
CHF -0.12% 0.42% 0.32% 0.87% 0.16% 0.51% 0.84%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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