Australian Dollar posts modest gains against US Dollar as markets await US flash PMI data

• Broad outperformance helps the Australian Dollar edge up against the US Dollar.
• Another RBA interest rate increase is anticipated by investors.
• An unchanged interest rate decision is expected from the Fed on Wednesday.

Broad strength in the Australian Dollar (AUD), supported by firm expectations of another Reserve Bank of Australia (RBA) interest rate increase this year, lifts the Aussie pair. During Friday’s European session, the AUD is marginally firmer against the US Dollar (USD), trading around 0.7018.

Can the Aussie extend gains as RBA warning puts inflation data in focus?

Comments by RBA Deputy Governor Andrew Hauser helped drive AUD-USD to its highest level since late September, according to analysts at Commerzbank, who say the Aussie “received further support from a significant rise in interest rate expectations,”. Market scrutiny of the forthcoming price figures has intensified after Hauser characterised the inflation outlook as “materially worse” than the RBA’s earlier expectations and cautioned about a possible “de-anchoring of inflation expectations,”.

With the RBA’s long-term inflation target at 2-3%, Commerzbank views the survey findings cited by Hauser as a concern. According to the bank, he drew attention to evidence that “a growing share of businesses believe that inflation of 3-3.5% is ‘the new normal’.” Commerzbank describes this as “certainly be concerning,” especially since “trimmed-mean inflation most recently stood at 3.6%, further above the target range.”

Against this backdrop, Commerzbank says the situation “makes the inflation data due on 28 October all the more important.” The bank notes that the RBA’s August forecasts had already projected “headline inflation to fall to 3.6% and trimmed-mean inflation to 3.3% by December,” adding that the forthcoming figures “should at least provide indications that inflation is indeed moving in that direction.” It warns that if “price pressures remain similarly elevated or even intensify, however, this would validate the recent rise in rate-hike expectations and cement the risk of another rate move at the RBA’s meeting on 3 November.”

For the US Dollar, attention is on October’s preliminary United States (US) S&P Global PMI figures, scheduled for release at 13:45 GMT. Expectations point to another rise in both the manufacturing and services PMI, although the increases are likely to be moderate.

Having retested Thursday’s three-week low of 101.44, the DXY has recovered. At the time of writing, the USD Index is up 0.1%, trading close to 101.75.

Next week’s monetary policy announcement from the Federal Reserve (Fed) will be the key catalyst for the US Dollar. Expectations are for interest rates to remain in the 3.75%-4.00% range.

AUD/USD Technical Analysis: Can Buyers Defend The EMA?

A mildly bullish near-term bias remains in place as AUD/USD, quoted at 0.7019 on the daily chart, stays just above its 20-day exponential moving average (EMA) of 0.7001. The pair is defending this dynamic support. Meanwhile, the Relative Strength Index (RSI) reading of 51.5 is only slightly above neutral, suggesting that momentum is stabilising following the recent recovery from oversold territory, rather than signalling a strong impulsive rally.

The 20-day EMA near 0.7001 offers immediate downside support. Today’s opening area of 0.7020/0.7020 serves as a nearby pivot; a break below it would undermine the positive bias and leave the pair vulnerable to deeper consolidation. As the current dataset provides no clear technical levels overhead, additional gains would likely hinge on buyers continuing to protect the EMA base and lifting the pair further from the 0.70 mark, thereby preserving the broader recovery structure.

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