Australian Dollar slips as Fed hike bets meet Middle East Oil risk

• AUD/USD falls 0.29% to 0.6963 after reversing higher.
• Fed officials see scope for another rate hike this year.
• Hormuz tensions threaten higher oil prices and global bond yields.

The Australian Dollar makes a U-turn and loses over 0.29% on Wednesday after the Federal Reserve revealed members expect another rate hike towards the year-end. The AUD/USD trades at 0.6963.

AUD/USD retreats as hawkish Fed minutes and geopolitical tensions revive Dollar demand

Sentiment turned negative as US equity markets registered losses. US Treasury yields tumbled, with the US Dollar held firm, as the US Dollar Index (DXY) rising 0.40% to 102.24.

The Fed’s minutes confirmed the hawkish tone, though the board was split as seeing September’s move as precautionary, while others expect further rate hikes. Of note is that “several participants” do not see policy as restrictive or only mildly restrictive.

Despite the hawkish tone of the minutes, money markets remain skeptical of a Fed rate hike in October. Instead, the odds of a December meeting are 78%, with a 25-basis-point rate increase, according to the CME FedWatch Tool.

Other data showed that American households are turning pessimistic about financial conditions and expect inflation to rise further, according to the New York Fed Survey of Consumers. Inflation expectations for one year rose from 3.6% to 3.9%, while those for three and five years were 3.3% and 3%, respectively.

In Australia, the economic docket was absent, but traders are eyeing the release of Consumer Inflation Expectations for October, following September’s reading of 4.9%.

In the meantime, geopolitics will continue to drive the financial markets. Oil prices rose modestly amid an increase in Iranian attacks in the Strait of Hormuz.

ANZ analysts, in a report, revealed that “Ship tracking data showed that crude oil exports reached over 18 mb/d in the last week of September. Most of that was recorded coming from the UAE, which has become an integral part of a shuttle system that has allowed other producers to get their oil through the strait.”

What’s up next for AUD/USD traders?

Eyes will remain on the market mood and hostilities in the Middle East. US President Trump warned that he might order a strike on Iran before the midterms, which could push energy prices higher. Alongside this, global bond yields could spike, increasing the safe-haven appeal of the US Dollar.

The US economic docket will feature jobless claims and the University of Michigan (UoM) Consumer Sentiment.

AUD/USD Price Forecast: Technical outlook

In the daily chart, AUD/USD trades at 0.6961, extending a bearish near-term bias as spot holds beneath the cluster of the 50-, 100- and 200-period simple moving averages (SMAs) grouped around 0.7091. The pair has retreated from the recent highs and now trades closer to the rising trend-line supports, while the Relative Strength Index (14) at 34.8 hovers just above oversold territory, hinting that downside pressure persists but is gradually losing momentum.

On the downside, initial demand is expected near the latest upward support trend line drawn from 0.6865, which tracks just below the current price zone, followed by deeper structural support along the longer-term rising lines originating at 0.6833, 0.6897 and 0.6673. On the topside, immediate resistance is seen at the triple SMA cluster around 0.7091, with a stronger barrier at the horizontal level of 0.7198; only a sustained break above these caps and the broader downward resistance trend line would ease the current bearish tone.

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