Australian Dollar strengthens as US tech jitters weigh on US Dollar

• A 0.32% gain lifts the Australian Dollar on Tuesday as the US Dollar softens and US Treasury yields fall.
• The US currency is losing appeal as concerns over the artificial intelligence sector weigh on sentiment.
• Benchmark lending rates remain unchanged at the People's Bank of China, while Oil market tensions heighten US inflation risks.

A 0.32% advance puts AUD/USD near 0.7000 on Tuesday at the time of writing. A softer US Dollar (USD) is supporting the Australian Dollar (AUD). Falling US Treasury yields and mounting concerns over Artificial Intelligence (AI) sector valuations continue to weigh on the US currency.

After climbing to elevated levels last week, the US Dollar continues to face selling pressure. At the time of publication on Tuesday, the US Dollar Index (DXY) is down approximately 0.2% at around 101.77. The index, which tracks the Greenback against a basket of six major currencies, approached 103 last week, its highest reading since April 2025.

Developments in AI have become a particular source of sensitivity for the US Dollar. Over recent months, substantial foreign investment in AI-related US equities has underpinned the currency. That support is now weakening as technology shares correct and optimism over AI fades, diminishing the Greenback's appeal.

Lower US Treasury yields are adding to the pressure. Compared with 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 Aussie's advances remain relatively modest following the People's Bank of China's (PBoC) monetary policy announcement. In line with expectations, 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.

With investors weighing the growth prospects of the world's second-largest economy, the decision reaffirms the caution of Chinese monetary authorities. Australia's substantial dependence on exports to China, especially commodities, means the Chinese economic outlook continues to play a central role in Australian Dollar movements.

Energy-driven 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 over possible disruption to global Oil supplies are growing following Houthi attacks on Saudi energy infrastructure and a rising number of incidents targeting vessels in the Strait of Hormuz.

If higher energy costs rekindle inflationary pressure 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 year-end.

A Reuters poll released on Tuesday found 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. This would follow September's 25-basis-point (bps) increase. Every economist surveyed, however, forecasts a further rate rise in December.

Despite support for AUD/USD from lower Treasury yields and concerns over the US technology sector, this policy outlook could constrain further advances in the pair by limiting US Dollar losses.

0.7000: AUD/USD technical outlook

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

The first downside support lies at the horizontal level near 0.6995. Below that, trend-line support at 0.6988 precedes the 200-period and 100-period SMAs at 0.6966 and 0.6960. Immediate upside resistance stands at 0.7014, ahead of the next barrier at 0.7040. A sustained move above these levels would clear the way for a stronger advance in AUD/USD.

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