AUD/USD Holds Above 0.7000 Ahead of CPI, Fed Decisions

Key Moments

Australian Dollar Firms Ahead of Key Central Bank Events

AUD/USD is edging higher around 0.7025 during Asian trading on Tuesday, drawing support from expectations that the Reserve Bank of Australia (RBA) will maintain a hawkish stance. Market participants are positioning ahead of Australia’s September Consumer Price Index (CPI) release on Wednesday, which will come shortly before the US Federal Reserve announces its latest interest rate decision.

The RBA raised its policy rate in late September to 4.6%, described as the highest level in 15 years. RBA Assistant Governor Sarah Hunter indicated that policymakers still see work to be done on inflation, suggesting that additional tightening is likely when the board convenes early next month.

“The board have put through four rate hikes this year to keep on tackling the challenge” of inflation, said Hunter. “Unfortunately, not quite yet.” “I’m not going to front run what the board might or might not do with interest rates. All I do know is that they are committed to tackling inflation and getting inflation down,” Hunter added.

Focus on Australian CPI and Fed Policy Path

Wednesday’s Australian inflation data will be closely monitored for signals on the future path of RBA policy. Consensus expectations are for headline CPI to increase 4.2% YoY in September, compared with 4.0% previously. On a monthly basis, CPI is projected to rise 0.7% in September, up from 0.4% in August.

Later the same day, attention will shift to the Federal Reserve’s policy announcement. Economists anticipate that the Fed will keep rates unchanged following its increase in September. Despite this, markets continue to see a substantial likelihood of another hike in December, keeping the US Dollar’s rate outlook in focus.

UOB Maintains Bullish Near-Term Stance on AUD/USD

Analysts at UOB Group continue to view the Australian Dollar constructively in the medium term. They note that they “turned positive on AUD last Wednesday (21 Oct, spot at 0.7005), indicating that AUD ‘could rise toward 0.7035.’” After that objective was achieved, they remark that “after AUD tested 0.7035, we highlighted on Thursday (22 Oct, spot at 0.7025) that AUD ‘could advance further, though the next technical target at 0.7070 may not come into view so soon.’”

UOB states that it will “continue to hold the same view as long as 0.6985 (no change in ‘strong support’ level) is not breached,” underscoring 0.6985 as the main support level that underpins their positive 1–3 week outlook.

Fed Communication: Data-Dependent, Hawkish but Cautious

Fed Chair Warsh’s recent remarks were assessed at 5.6/10 on the FXS Speechtracker, slightly below the historical average of 6.1/10. The tone was described as cautious and shaped by past crises, even as he expressed optimism regarding structural growth and an upswing in investment.

His acknowledgment of being “over-scarred from the global financial crisis” illustrated a continued emphasis on financial stability and tail risks. At the same time, Warsh pointed to policy-supported investment momentum and declined to signal outcomes for the October and December meetings, leaving the Dollar’s rate trajectory firmly dependent on upcoming data.

Warsh also highlighted artificial intelligence as a near-term driver of demand, a potential tool for improving data quality and monetary policy, and a possible but uncertain source of labor market disruption. This perspective is likely to be interpreted as favoring a measured approach rather than aggressive tightening.

The FXS Fed Sentiment Index was unchanged, moving 0.00 points to 127.51, a level described as still elevated. With the index remaining above 100, the overarching stance is characterized as clearly hawkish. References to an investment upswing and expectations around AI-related productivity are seen as supportive of Dollar-favorable views, even as Warsh stresses that key policy decisions later this year will hinge on data.

Technical Picture: AUD/USD Constrained Below 100-Day SMA

From a technical perspective, AUD/USD remains under near-term pressure on the daily chart, as the pair trades below the 100-day simple moving average (SMA). This configuration keeps the broader bias capped even though the 14-day Relative Strength Index stands at 52, signaling a stabilization in momentum rather than a robust bullish trend.

Price action is also positioned beneath the upper Bollinger Band while holding above the middle band, indicative of consolidation within the lower portion of the recent volatility range.

On the topside, the 100-day SMA near 0.7035 is the first resistance to watch, followed by the upper Bollinger Band around 0.7045, an area where sellers could potentially reassert control. To the downside, the middle Bollinger Band near 0.6978 offers initial support, with a stronger cushion seen around the lower band near 0.6915, which defines the bottom of the current trading corridor.