RBA inflation warning lifts Aussie Dollar above 0.70 to a two-week high

• AUD/USD climbs to a two-week high at 0.7017.
• Despite tighter policy, the inflation outlook has worsened, RBA’s Hauser cautions.
• Dollar comes under pressure before the Fed decision as US employment data disappoints.

Broad-based US Dollar weakness lifts the Australian Dollar sharply against the Greenback, taking AUD/USD past 0.7000 to a two-week peak of 0.7017. The advance above 0.7000 comes against a sparse economic calendar in both Australia and the US.

Can AUD/USD extend its rally as worsening Australian inflation prospects bolster RBA tightening bets?

Speaking at a Citi conference in Sydney at the time of writing, Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser said that, despite monetary policy tightening, the “inflation outlook appears worse than forecast, slightly above expectations,”.

While acknowledging that monetary policy is effective, Hauser added that “inflation has remained elevated for an extended period,” and that the “inflation outlook deteriorates.”

Beyond Hauser’s comments, Australia’s economic calendar offers no releases, leaving traders focused on the S&P Global Flash PMIs due on 22 October.

US job growth slowed from 26K to 18.5K in the latest ADP Employment Change 4-week average report. After the ADP release, the US Department of Labor reported a -7.3% plunge in September Pending Home Sales, compared with forecasts for a 0.5% contraction.

A 0.24% decline left the US Dollar Index (DXY) at 101.73 at the close of the session. The index tracks the Greenback against a basket of six currencies.

Next week’s Federal Reserve monetary policy meeting is now the focus for traders. According to Prime Terminal, money markets had assigned only a 14% probability to a rate hike at the October meeting, compared with 89% for December.

A narrowing of the interest rate differential could follow, favouring the Australian Dollar and pointing to further gains in AUD/USD.

Upcoming US releases include Initial Jobless Claims for the week ending 17 October, S&P Global Flash PMIs and the University of Michigan’s final Consumer Sentiment reading for October.

AUD/USD Price Forecast: What does the technical picture suggest?

A bearish near-term bias persists on the AUD/USD daily chart, with the pair trading at 0.7010 after slipping below its three simple moving averages (50, 100 and 200-day), clustered near 0.7078. Although the price remains above the rising support trend line, whose break level is 0.6917, a dense group of ascending support lines now acts as overhead resistance between 0.7091 and 0.7440. This arrangement supports the view that the retreat is corrective within a broader recovery structure. Following the recent decline from the 0.72 area, the Relative Strength Index (14) is neutral at 50.18, suggesting consolidative momentum.

Any advance would first encounter the three simple moving averages near 0.7078, ahead of the upward-sloping trend line break at 0.7091. A more substantial hurdle lies at the horizontal resistance of 0.7198, followed by the trend line break at 0.7440 and higher structural barriers at 0.8921 and 0.9871. For declines, the current price region around 0.7010 provides immediate support. The next significant floor corresponds to the rising trend-line break near 0.6917, with a deeper fall bringing the earlier breakout level at 0.6358 into focus.

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