Australian Dollar Falls Against Strong US Dollar Amid Hawkish Federal Reserve Policies

Australian Dollar Declines as US Dollar Gains Strength Amid Less Dovish Fed

Source: FXStreet

Market Overview

• The Australian Dollar (AUD) has experienced a downward trend against the US Dollar (USD), marking its third consecutive session in decline.
• The USD continues to strengthen ahead of the upcoming US presidential election, fueled by positive economic data.
• Traders are awaiting the release of Australia’s quarterly Consumer Price Index (CPI) data for further insights into the Reserve Bank of Australia's (RBA) policy direction.

Reserve Bank of Australia Stance

• The RBA's current cash rate stands at 4.35%, deemed sufficient to manage inflation within the target range of 2%-3% while supporting employment.
• A rate cut by the RBA is considered unlikely in the near term, which may limit further downside for the AUD.

US Economic Indicators

• Recent positive economic data from the US supports expectations for nominal interest rate cuts by the Federal Reserve (Fed).
• Market forecasts indicate a 95.8% probability of a 25-basis-point rate cut by the Fed in November.
• Traders are particularly focused on upcoming US Q3 GDP figures and October’s Nonfarm Payrolls report.

Political and Global Influences

• Market sentiment is influenced by the increasing likelihood of former President Donald Trump winning the upcoming election, now estimated at 52% according to polls.
• Geopolitical tensions, particularly from Iran’s recent comments regarding potential military responses, are adding to the demand for safe-haven assets like the USD.

Technical Analysis of AUD/USD

• As of the latest trading session, the AUD/USD pair is trading near 0.6570, within a descending channel indicating a bearish bias.
• Key support is anticipated around 0.6540, while resistance levels are noted at 0.6600 and 0.6610.