AUD/USD Tests a Break From Consolidation Near 0.7040: Price Forecast

• AUD/USD retreats towards 0.7040 as the US Dollar recovers.
• Strong Australian CPI readings for Q3 and September have reinforced expectations of a hawkish RBA.
• Attention turns to the US flash Q3 GDP release and September PCE inflation figures.

A 0.14% decline leaves the Australian Dollar (AUD) trading near 0.7040 against the US Dollar (USD) in Thursday’s European session. Having reached a fresh monthly high of 0.7068, AUD/USD is pulling back as the US Dollar recovers. The move comes ahead of the United States (US) flash Q3 Gross Domestic Product (GDP) release and September Personal Consumption Expenditure (PCE) Price Index figures, due at 12:30 GMT.

At the time of writing, a 0.1% gain puts the US Dollar Index (DXY) near 102.20. The index tracks the Greenback against six major currencies. Its recovery follows pressure on Wednesday after the Federal Reserve’s (Fed) monetary policy announcement, when the central bank left the Federal Fund Rate unchanged in the 3.75%-4.00% range.

US growth expected to remain resilient

TD Securities expects the forthcoming US activity figures to indicate that the economy “will likely show a resilient economy that can handle more restriction.” In the bank’s view, “Q3 GDP [will] show robust underlying growth.” On the headline figures, TD Securities observes that “GDP growth picked up in Q3 to 2.5% from 2.2% previously with underlying activity remaining robust,” an assessment broadly consistent with other forecasts. Those projections also stress firm consumption and investment, despite modest drags from some components, including net exports and inventories.

For the core PCE Index, the Fed’s preferred inflation measure, expectations point to a rise to 3.1% Year-on-Year (YoY), compared with the previous reading of 3%.

In Australia, strong Consumer Price Index (CPI) readings for the third quarter and September have increased financial markets’ confidence that the Reserve Bank of Australia (RBA) will raise interest rates at its November policy meeting.

Australian inflation surprise strengthens RBA rate-rise expectations and underpins Aussie

The latest Australian inflation figures, Brown Brothers Harriman says, “beat expectations, strengthening the case for another RBA hike and underpinning AUD.” According to the bank, “September headline CPI rose 4.3% y/y (consensus: 4.2%) vs. 4.0% in August,” with the stronger-than-expected result “reflecting rising housing and transport costs,” adding weight to market pricing for further monetary tightening.

AUD/USD Holds a Modest Bullish Bias

On the four-hour chart, the breakout from AUD/USD’s consolidation range between 0.6994 and 0.7040 is being tested.

Holding above the 20-period Exponential Moving Average (EMA) at 0.7036 leaves the pair with a modest bullish bias, pointing to underlying buying interest on shallow dips.

A Relative Strength Index (RSI) reading of 58 also suggests a mildly positive outlook: momentum remains favourable, but has not reached overbought territory.

Initial support lies at the 20-period EMA of 0.7036, followed by 0.6994, the lower boundary of the consolidation range noted above. If buyers emerge near the area being tested, the pair would look to extend its gains towards 0.7100.

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