Australian Dollar clings to early recovery near 0.6970, US data takes centre stage

Australian Dollar remains supported near 0.6970 as the Australian Dollar remains under pressure.
Further acceleration in Australian inflation reinforces hawkish RBA expectations.
The US Dollar trades lower ahead of key US data.

The Australian Dollar (AUD) holds onto its early recovery move at around 0.6970 against the US Dollar (USD) during the European trading session on Wednesday. Still, the Aussie pair is down 0.19% to near 0.6970.

Australian Dollar Price Today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the British Pound.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.13%	-0.49%	-0.17%	-0.07%	0.21%	-0.15%	0.01%
EUR	0.13%		-0.33%	-0.07%	0.06%	0.32%	-0.03%	0.14%
GBP	0.49%	0.33%		0.27%	0.41%	0.67%	0.32%	0.49%
JPY	0.17%	0.07%	-0.27%		0.10%	0.39%	0.00%	0.20%
CAD	0.07%	-0.06%	-0.41%	-0.10%		0.28%	-0.09%	0.10%
AUD	-0.21%	-0.32%	-0.67%	-0.39%	-0.28%		-0.36%	-0.18%
NZD	0.15%	0.03%	-0.32%	0.00%	0.09%	0.36%		0.18%
CHF	-0.01%	-0.14%	-0.49%	-0.20%	-0.10%	0.18%	-0.18%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

The pair attracted bids near 0.6958 after a weak opening, following the release of the hot Australian Consumer Price Index (CPI) data for August, which would reinforce expectations of more interest rate hikes by the Reserve Bank of Australia (RBA) in the near term even after raising them 100 basis points (bps) to 4.6% so far this year.

Analysts at Commerzbank argue that the latest inflation data underscore why market pricing for “1.5 additional rate hikes by the RBA, as the market was still expecting yesterday”. One day after the RBA’s monetary policy meeting, they note that the CPI figures released today reinforce the case for a more cautious stance.

While acknowledging that “there’s no question that inflation is still too high, and it will take a while before it returns to the middle of the target range, the Commerzbank is still not satisfied with hawkish RBA expectations and sees limited likelihood of further policy tightening.

The CPI report showed that inflationary pressures accelerated to 4% Year-on-Year (YoY), as expected, from 3.5% in July.

Meanwhile, the US Dollar is also under pressure ahead of the United States (US) ADP Employment Change data for September and the Personal Consumption Expenditure (PCE) Price Index data for August, which will be published in the North American session.

AUD/USD Technical Analysis

In the daily chart, AUD/USD trades at 0.6971, extending its slide below the 20-day exponential moving average (EMA) at 0.7078 and shifting the near-term bias firmly bearish. The pair has also fallen back under the 61.8% Fibonacci retracement at 0.7008, highlighting renewed downside pressure, while the Relative Strength Index (RSI) at 29.2 slips into oversold territory, which hints that the recent decline may be stretched but not yet decisively exhausted.

On the topside, initial resistance emerges at the 61.8% retracement at 0.7008, followed by the 50.0% level at 0.7052 and the 20-day EMA at 0.7078, with the 38.2% retracement at 0.7096 and the 23.6% level at 0.7150 reinforcing a broader cap ahead of the cycle high anchor near 0.7238. On the downside, immediate support is seen at the 78.6% retracement at 0.6946, ahead of the 100.0% Fibonacci anchor at 0.6866, where sellers could pause to reassess the trend if oversold conditions start to attract profit-taking.

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

RBA FAQs

What is the Reserve Bank of Australia and how does it influence the Australian Dollar?

The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

How does inflation data impact the value of the Australian Dollar?

While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

How does economic data influence the value of the Australian Dollar?

Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

What is Quantitative Easing (QE) and how does it affect the Australian Dollar?

Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

What is Quantitative tightening (QT) and how does it affect the Australian Dollar?

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.

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