Australian Dollar probes 0.7000 amid risk aversion as RBA hike draws near

• Subdued sentiment amid Asian equity weakness keeps AUD/USD under pressure near 0.7000.
• A 25-basis-point RBA rate increase is anticipated, taking the policy rate to 4.85%.
• With WTI Oil sliding 6.50%, the probability of a Fed rate hike drops to 72%.

Pressure on the Australian Dollar marked the start of the week, with AUD/USD near 0.7000 on the daily chart. Following upbeat US economic figures, investors are preparing for the Reserve Bank of Australia (RBA) monetary policy announcement.

Why is AUD/USD under pressure despite a weaker US Dollar ahead of the RBA meeting?

Risk aversion took hold as US technology shares slipped following Apple’s earnings, weighing on Asian equities. Earlier optimism had stemmed from speculation over a resolution to the US-Iran conflict. Newswires reported that Iranian hardliners had authorised Iranian President Pezeshkian to enter talks, while Trump said he would not strike after the election.

October’s ISM Manufacturing PMI rose to 55.5 from 54.5, exceeding the 54.6 forecast. Although the PMI’s inflation sub-component eased, it stayed in expansionary territory. Nevertheless, the CME FedWatch Tool showed that money markets had lowered the probability of a 25-basis-point rate increase to 72%, compared with 80% a week earlier.

A decline in US Treasury yields weighed on the US Dollar. At 101.78, the US Dollar Index (DXY), which tracks the currency against its peers, is 0.17% lower.

The pullback was linked to a sharp fall in Oil prices, signalling that inflation pressures could moderate in the near term. On Monday, the US crude benchmark West Texas Intermediate (WTI) dropped 6.50% to $96.25 per barrel.

Attention on the upcoming US economic calendar turns to the Job Openings and Labour Turnover Survey (JOLTS), a key release for gauging current labour market conditions. Factory Orders are also forecast to strengthen, rising from 0.1% in August to 1.2% in September.

LSEG data indicate expectations for the Reserve Bank of Australia (RBA) to raise interest rates by 25 basis points to 4.85%. That would mark the final increase both this year and next year. Following the decision, investors will look to Governor Michele Bullock’s press conference for indications of the future path of interest rates.

In a note, ANZ analysts said: “The post-meeting communication will likely focus on the hard choices the RBA faces in a world of supply shocks and constrained capacity.”

The analysts also anticipate an upward revision to the unemployment rate, adding that the RBA is expected to raise its forecasts to reflect the trimmed-mean inflation reading.

AUD/USD Price Forecast: What does the technical outlook suggest?

Trading near 0.6996 on the daily chart, AUD/USD retains a bearish short-term bias below the cluster of simple moving averages around 0.7063. A retreat beneath the latest uptrend-line break at 0.7117 indicates that recent efforts to establish a base have faltered. Meanwhile, a Relative Strength Index (14) reading of 46 points to neutral-to-weak momentum, rather than clearly oversold conditions.

The simple moving average zone around 0.7063 presents the first upside resistance, ahead of the reclaimed uptrend-line break near 0.7117. The horizontal barrier around 0.7198 offers a firmer ceiling. On a decline, the rising trend-line break near 0.6922 provides initial support. Further down, structural demand is concentrated around the origins of earlier upward trend lines in the 0.6897–0.6833 zone, where buyers would likely seek to limit additional losses.

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