Are US tech jitters weighing on the US Dollar as the Australian Dollar strengthens?

• A softer US Dollar and lower US Treasury yields support the Australian Dollar, which gains 0.32% on Tuesday.
• The US currency is losing appeal as concerns over the artificial intelligence sector weigh on sentiment.
• Oil market tensions add to US inflation risks as the People's Bank of China leaves benchmark lending rates unchanged.

Support from a weaker US Dollar (USD) lifts the Australian Dollar (AUD) on Tuesday, with AUD/USD trading near 0.7000, a gain of 0.32% for the day at the time of writing. Falling US Treasury yields and mounting concerns over valuations in the Artificial Intelligence (AI) sector continue to weigh on the US currency.

After climbing to elevated levels last week, the US Dollar continues to face selling pressure. At the time of publication on Tuesday, the US Dollar Index (DXY) is trading near 101.77, down approximately 0.2%. The index, which tracks the Greenback against a basket of six major currencies, had approached 103 last week, its highest reading since April 2025.

Developments in the AI sector now have a particularly strong influence on the US Dollar. In recent months, substantial foreign investment in AI-related US equities has underpinned the currency. That support is weakening, however, as technology shares correct and enthusiasm for AI fades, diminishing the Greenback's appeal.

Lower US Treasury yields add to the downward pressure on the currency. From approximately 5.36% earlier this month, the benchmark 10-year US Treasury yield has fallen to around 5.08%. As the yield advantage of USD-denominated assets narrows, the Australian Dollar receives indirect support.

Against other major currencies, however, the Aussie's gains are relatively modest following the monetary policy decision by the People's Bank of China (PBoC). On Tuesday, the Chinese central bank left its one-year Loan Prime Rate (LPR) at 3.00% and its five-year rate at 3.50%, matching expectations.

With investors weighing the growth prospects of the world's second-largest economy, the decision underscores Chinese monetary authorities' cautious stance. Australia's substantial dependence on exports to China, especially commodities, means the Chinese economic outlook continues to be a major influence on the Australian Dollar.

Further losses in the US Dollar may nevertheless be constrained by mounting inflation risks from energy prices. On Tuesday, West Texas Intermediate (WTI) Oil nears $100, its highest level in more than a month. Concerns over possible disruptions to global Oil supplies are growing following Houthi attacks on Saudi energy infrastructure and a rising number of incidents involving vessels targeted in the Strait of Hormuz.

If higher energy costs revive inflationary pressure in the United States (US), the Federal Reserve (Fed) could keep monetary policy restrictive for longer than previously anticipated. It could even raise interest rates again before the year ends.

A Reuters poll released on Tuesday showed that 94 out of 100 economists expect interest rates to remain in the 3.75%-4.00% range at the Fed's October 27-28 meeting, after September's increase of 25 basis points (bps). Every economist surveyed, however, expects a further rate increase in December.

Although lower Treasury yields and worries about the US technology sector currently support AUD/USD, this policy outlook could restrict further US Dollar losses and limit the pair's upside.

AUD/USD Technical Analysis: Can the Pair Extend Its Gains?

A near-term bullish bias persists on the one-hour chart as AUD/USD trades at 0.7000. The pair holds above its 100-period and 200-period simple moving averages (SMAs), at 0.6960 and 0.6966 respectively, while remaining aligned with rising trend-line support near 0.6988. At about 63, the Relative Strength Index (14) maintains a positive signal, indicating that buyers retain the advantage as the pair edges towards the top of its recent range.

The horizontal level near 0.6995 offers the first downside support, ahead of trend-line support at 0.6988. Below that, the 200-period and 100-period SMAs provide support at 0.6966 and 0.6960. A sustained move above immediate resistance at 0.7014 and the next barrier at 0.7040 would clear the way for a stronger rise in AUD/USD.

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