AUD/USD remains capped by a strong US Dollar as markets price in a potential 50-bps Fed hike in December, overshadowing minor risk-on sentiment from US-Iran diplomatic developments.
Hawkish comments from Fed Governor Waller have traders pricing a jumbo 50-bps December hike after hotter-than-expected US inflation, while the RBA is signalling its hiking cycle is near its end. This policy divergence and a USD at a two-week high cap rallies, with the 4-hour chart bearish below the 50-period SMA at 0.6955. Only a US-Iran diplomatic breakthrough and risk-on flows argue for a bounce.
Hotter-than-expected US consumer inflation on Tuesday pushed the dollar to a two-week high, and hawkish comments from Fed Governor Waller led traders to price a possible 50-bps December hike. Commerzbank says core inflation remains too high and no longer trending down, keeping tightening expectations firm. The dollar was today's strongest major currency against the Swiss Franc.
The RBA's dovish shift, signalling its hiking cycle may be at or near its end, contrasts sharply with the Fed's firming tightening expectations, keeping traders from aggressive bullish AUD bets. The currency hit its lowest level since late March near 0.6845 against the USD. Only the risk-on impulse from potential US-Iran diplomacy offers support.
The AUD/USD pair faces persistent selling pressure, trading near 0.6875 as a hawkish Federal Reserve outlook contrasts with a dovish Reserve Bank of Australia. While hopes for a US-Iran diplomatic breakthrough provide minor support, the pair remains technically bearish below the 0.6955 resistance level.
Markets now expect a possible 50-basis-point Fed rate hike in December after hawkish comments and hot US inflation, while the Reserve Bank of Australia signals its hiking cycle is ending — a widening interest-rate gap that favours the US dollar.
On the upside, rallies are likely to be sold near 0.6955, the 50-period SMA on the 4-hour chart. On the downside, a sustained break below the recent swing low around 0.6857 would reinforce the downtrend and expose deeper losses.
Hotter-than-expected US inflation figures and hawkish Fed commentary have raised expectations of a 50-basis-point rate hike in December, keeping the dollar near a two-week high.
The article describes a dovish shift by the RBA, signalling that its hiking cycle may be at or near its end, which weighs on the Australian dollar against the Fed-tightening US dollar.