Australian Dollar continues recent slide ahead of Fed decision

• AUD/USD continues to pull back from four-month highs achieved last week..
• Markets lean toward a quarter-point Fed rate hike to 3.75%-4.00% on Wednesday.
• The ADP Employment Change four-week average firmed to 16.25K from 12.25K, adding to the case for a hawkish Fed.

AUD/USD trades near the 0.7120s, down from the four-month highs it set near 0.7200 earlier this month. The US Dollar (USD), tracked by the US Dollar Index (DXY), holds just below the 100.00 mark and is firmer on the day as traders square positions before the main event.

That event is Wednesday's Federal Open Market Committee (FOMC) decision. The Federal Reserve (Fed) has kept its target range at 3.50%-3.75% since December 2025, leaving it unchanged in the previous five meetings. Markets are now leaning toward a 25-basis-point (bps) rise to 3.75%-4.00%, after Chair Kevin Warsh used his Jackson Hole address to warn that inflation had not meaningfully improved and a solid August jobs report followed.

Earlier in the day, the ADP Employment Change four-week average rose to 16.25K, up from 12.25K, pointing to a US jobs market that is holding its footing rather than cooling. It is a second-tier print, but the direction matters as a steadier labor market gives the Fed more room to lift rates and reinforces Chair Kevin Warsh's message that the inflation job is not yet done.

Before the decision lands, US Retail Sales for August print. The number matters for the rate call. A firm read supports the view that the US consumer is holding up and gives the Fed room to move, while a soft one muddies the hawkish case just hours before the statement.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.7128, maintaining a bearish near-term tone as it holds below both the 20-period and 100-period Simple Moving Averages (SMA) at 0.7152 and 0.7178, respectively. The pair is stabilizing just above horizontal support at 0.7119, while the Relative Strength Index (RSI) hovers near 30, hinting at stretched downside momentum but not yet signaling a confirmed reversal.

On the topside, immediate resistance emerges at 0.7129, followed by 0.7134 and 0.7141. The 20-period SMA at 0.7152 and the 100-period SMA at 0.7178 reinforce a broader supply zone overhead. On the downside, the first notable support is the horizontal level at 0.7119; a sustained break below this floor would expose further weakness in the pair’s short-term structure.

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