Aussie Gains as Hot Inflation Sparks RBA Rate Hike Bets

Key Moments

Rally in AUD/USD Stalls Below Key Resistance Ahead of FOMC

The AUD/USD pair extended its advance for a second consecutive session on Wednesday, reaching a new peak since September 23 around the 0.7050-0.7055 band during Asian trading. The move followed a stronger Australian inflation print and signaled a clear move above the 100-day Simple Moving Average (SMA), a key technical barrier. However, market participants appeared reluctant to build larger long positions before the conclusion of the two-day FOMC meeting.

Australian CPI Surprise Lifts RBA Rate Hike Bets

Data from the Australian Bureau of Statistics (ABS) showed that the headline Consumer Price Index (CPI) increased 0.8% in September, accelerating from 0.4% previously and exceeding the 0.7% consensus forecast. On an annual basis, CPI rose to 4.3% from 4.0% in August, slightly above expectations for a 4.2% reading.

The annual trimmed mean measure of inflation stayed above the Reserve Bank of Australia’s (RBA) 2-3% target band, bolstering market conviction that an interest rate increase in November is likely. This shift in policy expectations offered a notable, though measured, tailwind to the Australian Dollar.

US Dollar Strength and FOMC Outlook Temper AUD Upside

In contrast, the US Dollar advanced to a two-week high as markets increasingly embraced the view that the Federal Reserve could deliver another rate hike before year-end amid ongoing inflation risks linked to elevated oil prices. Additionally, lingering geopolitical concerns supported demand for the US currency for a fourth straight session, curbing further appreciation in AUD/USD.

Attention turned to the forthcoming FOMC rate announcement later in the US session. The Federal Reserve was widely expected to keep policy rates unchanged, placing greater emphasis on the accompanying statement and remarks from Fed Chair Kevin Warsh during the press conference for signals on the future policy trajectory. Against this backdrop, the fundamental setup remained favorable to AUD/USD buyers, suggesting that any deeper pullbacks may attract renewed demand and stay relatively shallow.

Technical Picture: AUD/USD Holds Above 100-day SMA

From a technical standpoint, AUD/USD hovered just above the 100-day SMA while confronting a dense Fibonacci retracement zone overhead. The recent rebound from lows appeared to be losing steam as spot prices stayed below the 50% retracement level at 0.7066 and the 61.8% retracement at 0.7106. This configuration kept the broader technical bias neutral to slightly negative, despite the nearby support provided by the moving average.

On the downside, initial technical support was located at the 100-day SMA near 0.7033, reinforced by the 38.2% Fibonacci retracement at 0.7025. A decisive break below this support cluster would bring the 23.6% retracement at 0.6975 into view, followed by scope for a more pronounced decline toward the structural base around 0.6893.