Australian Dollar climbs to one-month high on support from hawkish RBA

• A fourth straight day of gains takes the Australian Dollar to its strongest level since late September.
• Expectations of a further interest rate hike strengthen as Australian central bank officials strike a hawkish tone.
• The pair continues to advance despite support for the US Dollar from geopolitical tensions and expectations of tighter monetary policy in the United States.

Bullish momentum in AUD/USD carries into Wednesday, with the pair up 0.42% on the day at around 0.7025 at the time of writing. Its fourth successive daily gain takes it to a fresh one-month high, following last week's rebound from below 0.6900, its lowest level since July. Behind the Australian Dollar's (AUD) strength are mainly hawkish remarks from several Reserve Bank of Australia (RBA) officials, which bolster expectations of additional monetary tightening.

Speculation that Australian monetary policy could stay restrictive for longer than previously anticipated has gathered pace following comments on Monday from RBA Assistant Governor Christopher Kent. He said several factors indicate that neutral interest rates are moving higher in Australia and globally.

The case for a possible interest rate hike at the next monetary policy meeting, scheduled for November 3, gained further support on Wednesday. RBA Deputy Governor Andrew Hauser warned that third-quarter underlying inflation, as measured by the trimmed mean, could come in above expectations.

Stronger-than-expected third-quarter Gross Domestic Product (GDP) in China is another source of support for the Australian Dollar. The encouraging figures from Australia's largest trading partner ease growth concerns surrounding the world's second-largest economy and underpin the demand outlook for Australian exports.

Several factors are lending support to the US Dollar (USD), although they have done little to restrain the rise in AUD/USD. While hopes that peace talks between the United States and Iran could resume dampen safe-haven demand, continuing uncertainty in the Middle East keeps investors wary.

Friday's preliminary global Purchasing Managers Index (PMI) releases are now in focus for investors, before attention turns to next week's Federal Open Market Committee (FOMC) monetary policy meeting.

Can the RBA's hawkish turn support the Aussie Dollar as rate hike odds rise and AI trades wobble?

Following hawkish comments from RBA Deputy Governor Andrew Hausner, MUFG analysts say the Australian rates market “has moved overnight to price in a higher probability of another RBA rate hike before the end of this year”. Comparing the current inflation outlook with the RBA's August forecasts, Hausner described it as “materially worse”, noting that “we’re seeing higher AI prices, tech prices feeding through into CPI…and we’re having a boom in data centre construction here in Australia as well, so that’s upside too, and then on domestic capacity pressure.”

Another concern he raised was that “inflation has been high for a very long time now, and we are beginning to see some signs that people in the community are not sure if we’re going to bring inflation back to target, or certainly not for an extended period.” Market participants have responded to the hawkish remarks by moving to “price in closer to a 50:50 probability of another RBA hike next month”, according to MUFG.

Although the Australian Dollar “has underperformed recently alongside the wobble for AI-related trades”, MUFG says higher Australian yields have “encouraged a stronger Australian Dollar this year”.

AUD/USD technical analysis: Can the bullish bias hold?

The near-term technical outlook for AUD/USD remains constructive on the one-hour chart, where the pair trades at 0.7028. Price stays above both the 100-period simple moving average (SMA) at 0.6975 and the 200-period SMA at 0.6973, while continuing to hold rising trend-line support around 0.7018. With price consolidating just below immediate resistance, the Relative Strength Index (14) near 60 points to steady bullish momentum rather than overbought conditions.

A sustained move above the initial horizontal resistance at 0.7040 would pave the way for additional intraday gains. Immediate downside support lies at the trend-line and horizontal levels of 0.7018 and 0.7014, followed by a further cushion at 0.6994. If these levels give way, the 100-period and 200-period SMAs, at 0.6975 and 0.6973 respectively, offer a lower structural base for the bullish setup.

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