Australian Dollar gains modestly against US Dollar before US flash PMI release

• Broad Australian Dollar outperformance lifts the currency slightly against the US Dollar.
• Another RBA interest rate increase is expected by investors.
• Wednesday’s Fed decision is expected to keep interest rates unchanged.

Around 0.7018 is the Australian Dollar’s (AUD) level against the US Dollar (USD), marginally higher in Friday’s European session. Firm expectations of another interest rate increase by the Reserve Bank of Australia (RBA) this year underpin the Australian Dollar’s outperformance and the pair’s modest advance.

Aussie gains; RBA inflation warning puts price data in focus

Comments by RBA Deputy Governor Andrew Hauser helped drive AUD-USD to its highest point since late September. Commerzbank analysts say the Aussie “received further support from a significant rise in interest rate expectations,” following his remarks. Calling the inflation outlook “materially worse” than the RBA had earlier anticipated, Hauser also flagged a possible “de-anchoring of inflation expectations,” bringing forthcoming price figures into sharper market focus.

Survey findings cited by Hauser showed that “a growing share of businesses believe that inflation of 3-3.5% is ‘the new normal’.” Commerzbank points to the RBA’s long-term inflation target of 2-3% in arguing that this would “certainly be concerning,” especially given that “trimmed-mean inflation most recently stood at 3.6%, further above the target range.”

For Commerzbank, the backdrop “makes the inflation data due on 28 October all the more important.” The RBA’s August projections had already envisaged “headline inflation to fall to 3.6% and trimmed-mean inflation to 3.3% by December,” while the next release “should at least provide indications that inflation is indeed moving in that direction.” The bank adds a warning: if “price pressures remain similarly elevated or even intensify, however, this would validate the recent rise in rate-hike expectations and cement the risk of another rate move at the RBA’s meeting on 3 November.”

For the US Dollar, attention turns to October’s preliminary United States (US) S&P Global PMI figures, due at 13:45 GMT. Further increases are expected in both the manufacturing and services PMI, although the pace is forecast to remain moderate.

A rebound has taken the USD Index 0.1% higher to around 101.75 at the time of writing. The DXY had revisited 101.44, the three-week low recorded on Thursday, before recovering.

Next week’s monetary policy announcement from the Federal Reserve (Fed) will be the main forthcoming catalyst for the US Dollar. Expectations point to rates remaining within the 3.75%-4.00% range.

0.7019: AUD/USD Technical Outlook

At 0.7019 on the daily chart, AUD/USD remains slightly above its 20-day exponential moving average (EMA) of 0.7001. Holding this dynamic support lends the near-term outlook a modest bullish tilt. Meanwhile, the Relative Strength Index (RSI) stands at 51.5, only just above neutral. That reading suggests momentum is stabilising following the recent rebound from oversold conditions, rather than signalling a strong impulsive rally.

The 20-day EMA near 0.7001 provides immediate downside support. Today’s opening area of 0.7020/0.7020 serves as a nearby pivot; losing it would erode the positive bias and leave room for deeper consolidation. The current dataset offers no clear technical levels overhead. Additional upside would therefore likely require buyers to keep protecting the EMA base and lift the pair further from the 0.70 handle, preserving the broader recovery structure.

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