Can the Australian Dollar build on gains above 0.7000 as Australia's CPI and Fed rate decision take centre stage?

• AUD/USD posts modest gains near 0.7025 during Asian trading on Tuesday.
• The fight against inflation is "not quite yet" over, according to RBA’s Hunter.
• Wednesday brings Australia’s CPI inflation figures and the Fed’s interest rate decision into focus.

Hawkish expectations for Reserve Bank of Australia (RBA) interest rates support AUD/USD, which strengthens towards 0.7025 in Tuesday’s Asian session. With Australia’s September Consumer Price Index (CPI) inflation report due later on Wednesday, traders are positioning for the release before the US Federal Reserve (Fed) announces its interest rate decision.

Following its late-September rate increase, the RBA’s interest rate stands at 4.6%, a 15-year high. Further increases appear likely at the policymakers’ meeting early next month, with RBA Assistant Governor Sarah Hunter indicating that the central bank is “not quite yet” finished with its fight against inflation.

On efforts to contain inflation, Hunter said: “The board have put through four rate hikes this year to keep on tackling the challenge”. She continued: “Unfortunately, not quite yet.” Hunter also added: “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,”

Wednesday’s Australian inflation release will be scrutinised for further indications of the interest rate trajectory. Forecasts put September’s headline CPI increase at 4.2% YoY, compared with the previous 4.0%. Monthly CPI inflation is expected to accelerate from 0.4% in August to 0.7% in September.

Later that day, the focus turns to the Fed’s policy meeting. After September’s rate increase, economists anticipate that the US central bank will keep interest rates steady. Nevertheless, expectations of a further increase remain high, and market pricing indicates a strong probability of another hike in December.

Can AUD/USD Maintain Its Positive Outlook as UOB Retains Upside Targets?

UOB Group’s strategists retain a positive medium-term outlook for AUD/USD. Recalling the start of that view, they say they “turned positive on AUD last Wednesday (21 Oct, spot at 0.7005), indicating that AUD ‘could rise toward 0.7035.’” Once the first objective had been achieved, their assessment was 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.’” The condition for retaining this stance remains unchanged: UOB will “continue to hold the same view as long as 0.6985 (no change in ‘strong support’ level) is not breached,” leaving 0.6985 as the crucial downside threshold for its positive 1–3 week outlook.

What Do Warsh’s Investment and AI Remarks Mean for the Data-Dependent Fed Outlook?

A slightly softer policy tone emerges from Fed Chair Warsh’s speech, which records 5.6/10 on the FXS Speechtracker against a historical average of 6.1/10. Despite optimism about structural growth and a surge in investment, his remarks reflect caution shaped by past crises. Describing himself as “over-scarred from the global financial crisis” points to continued vigilance over financial stability and tail risks. At the same time, Warsh stresses the strength of policy-led investment and declines to prejudge the October and December meetings, leaving the Dollar’s interest rate trajectory firmly dependent on incoming data. His treatment of AI combines its role as a near-term demand shock and a means of improving data and monetary policy with its potential, though uncertain, disruption of employment. This forward-looking awareness of risk is likely to be interpreted by markets as favouring gradual steps rather than aggressive tightening.

Despite the marginally softer FXS Speechtracker reading, the broader policy message remains distinctly hawkish: the FXS Fed Sentiment Index registered a 0.00-point change and stayed at an elevated 127.51. A reading firmly above 100 indicates that the Fed continues to favour restrictive policy settings. Talk of surging investment, coupled with hopes for AI-led productivity gains, should preserve expectations supportive of the Dollar, even as Warsh stresses that decisive moments later this year will depend on the data.

Technical Analysis: Can AUD/USD Break Above the 100-day SMA?

Trading below the 100-day simple moving average (SMA) leaves AUD/USD facing near-term pressure on the daily chart and limits the broader outlook. The latest Relative Strength Index (14) reading of 52 points more to stabilising momentum than clear strength. Meanwhile, the price sits above the middle Bollinger Band but below the upper band, indicating consolidation in the lower half of the recent volatility range.

The first upside hurdle is the 100-day SMA at 0.7035. Beyond it, sellers could return around the upper Bollinger Band at 0.7045. Immediate downside support lies near 0.6978 at the middle Bollinger Band, with a further buffer around 0.6915 at the lower band, marking the bottom of the current trading range.

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