One-month high for Australian Dollar as hawkish RBA lends support

• A fourth consecutive daily gain takes the Australian Dollar to its highest level since late September.
• Expectations of a further interest rate hike strengthen following hawkish remarks from Australian central bank officials.
• Despite support for the US Dollar from geopolitical tensions and expectations of tighter US monetary policy, the pair continues to climb.

AUD/USD is up 0.42% on Wednesday, trading around 0.7025 at the time of writing. A fourth consecutive daily advance takes the pair to a fresh one-month high. Last week, it rebounded from below 0.6900, its lowest level since July. Hawkish remarks from several Reserve Bank of Australia (RBA) officials are the main driver of Australian Dollar (AUD) strength, bolstering expectations of additional monetary tightening.

Several factors point to rising neutral interest rates in Australia and globally, RBA Assistant Governor Christopher Kent said on Monday. His remarks have heightened speculation that restrictive Australian monetary policy could last longer than previously anticipated.

Underlying inflation, as measured by the trimmed mean, could surpass third-quarter expectations, RBA Deputy Governor Andrew Hauser warned on Wednesday. The warning adds to expectations of a possible interest rate increase at the next monetary policy meeting on November 3.

Better-than-expected third-quarter Gross Domestic Product (GDP) in China is also supporting the Australian Dollar. The encouraging data from Australia's largest trading partner eases growth concerns over the world's second-largest economy and supports the demand outlook for Australian exports.

Several factors are lending support to the US Dollar (USD), although they have done little to restrain AUD/USD's gains. Prospects of renewed peace talks between the United States and Iran dampen demand for safe havens. Persistent Middle East uncertainty, however, keeps investors cautious.

Friday's preliminary global Purchasing Managers Index (PMI) releases are the next focus for investors, before the Federal Open Market Committee (FOMC) holds its monetary policy meeting next week.

50:50 RBA hike odds: Hawkish shift supports Aussie Dollar as AI trades wobble

Following hawkish comments from RBA Deputy Governor Andrew Hausner, MUFG analysts report that the Australian rates market “has moved overnight to price in a higher probability of another RBA rate hike before the end of this year”. Compared with the RBA’s August forecasts, Hausner described the inflation outlook as “materially worse”. He pointed out 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.”

A further concern, he said, is 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.” MUFG attributes the shift among market participants to these hawkish remarks, which have led them to “price in closer to a 50:50 probability of another RBA hike next month.”

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,”

0.7028: AUD/USD technical outlook

At 0.7028 on the one-hour chart, AUD/USD remains above both the 100-period simple moving average (SMA) at 0.6975 and the 200-period SMA at 0.6973. The near-term outlook stays constructive as long as the pair holds rising trend-line support around 0.7018. With the Relative Strength Index (14) near 60, momentum appears steadily bullish rather than overbought, while the price consolidates just below immediate resistance.

The horizontal barrier at 0.7040 marks the first resistance level. A sustained break above it would clear the path for additional intraday gains. Initial downside support lies at the trend-line and horizontal levels of 0.7018 and 0.7014, followed by 0.6994. Further below, the 100-period SMA at 0.6975 and 200-period SMA at 0.6973 form a deeper structural support base for the bullish setup.

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