US tech jitters weigh on US Dollar as Australian Dollar strengthens

• A 0.32% rise in the Australian Dollar on Tuesday reflects support from a softer US Dollar and lower US Treasury yields.
• Unease over the artificial intelligence sector is weighing on the US currency's appeal.
• The People's Bank of China leaves benchmark lending rates on hold as oil market tensions heighten US inflation risks.

At around 0.7000, AUD/USD is 0.32% higher on Tuesday at the time of writing. A softer US Dollar (USD) is supporting the Australian Dollar (AUD), with falling US Treasury yields and mounting concerns over Artificial Intelligence (AI) sector valuations weighing on the US currency.

Having approached 103 last week, its highest level since April 2025, the US Dollar Index (DXY) is down approximately 0.2% on Tuesday at around 101.77 at the time of writing. The index tracks the US Dollar against a basket of six major currencies, with the currency remaining under pressure after last week's elevated levels.

Developments in the AI sector now have a particularly strong bearing on the US Dollar. In recent months, substantial foreign investment in AI-related US equities has supported the currency. That support is fading, however, as the recent technology share correction and waning enthusiasm for AI diminish the dollar's appeal.

Lower US Treasury yields are adding to the pressure. Having stood at approximately 5.36% earlier this month, the benchmark 10-year US Treasury yield is now around 5.08%. The resulting reduction in the yield advantage of USD-denominated assets provides indirect support for the Australian Dollar.

Against other major currencies, however, the Australian Dollar's gains are relatively modest following the People's Bank of China's (PBoC) monetary policy decision. As expected, the Chinese central bank left its one-year Loan Prime Rate (LPR) at 3.00% and its five-year rate at 3.50% on Tuesday.

As investors weigh the growth prospects of the world's second-largest economy, the decision underlines Chinese monetary authorities' cautious stance. Australia's substantial dependence on exports to China, especially commodities, means the Chinese economic outlook remains an important influence on the Australian Dollar.

Rising energy-related inflation risks nevertheless constrain the scope for further US Dollar losses. On Tuesday, West Texas Intermediate (WTI) oil is nearing $100, its highest level in more than a month. Concerns about possible disruption to global oil supplies have intensified amid Houthi attacks on Saudi energy infrastructure and a growing number of incidents targeting vessels in the Strait of Hormuz.

Should higher energy costs revive inflationary pressures in the United States (US), the Federal Reserve (Fed) could keep monetary policy restrictive for longer than previously anticipated. It could even raise interest rates again before the year ends.

A Reuters poll released on Tuesday showed that 94 out of 100 economists expect interest rates to remain in the 3.75%-4.00% range at the Fed's October 27-28 meeting, after September's 25-basis-point (bps) increase. Every economist surveyed nevertheless expects a further rate rise in December.

Despite the support AUD/USD currently draws from lower Treasury yields and unease over the US technology sector, this outlook could curb US Dollar losses and restrict the pair's further advance.

AUD/USD technical analysis points to a bullish near-term bias

Trading at 0.7000 on the one-hour chart, AUD/USD maintains a bullish short-term bias. The pair holds above its 100-period and 200-period simple moving averages (SMAs), at 0.6960 and 0.6966 respectively, while remaining aligned with rising trend-line support near 0.6988. At about 63, the Relative Strength Index (14) remains constructive, indicating that buyers retain the advantage as the pair edges towards the top of its recent range.

The first downside support lies at the horizontal level around 0.6995. Below that, trend-line support at 0.6988 precedes the 200-period and 100-period SMAs at 0.6966 and 0.6960. An immediate upside hurdle stands at 0.7014, followed by resistance at 0.7040. A sustained break above these levels would pave the way for a stronger rise in AUD/USD.

(The technical analysis in this article was prepared with assistance from an AI tool. Learn more.)