Above 0.7000: AUD/USD price forecast as pair pares hot Aussie CPI-driven gains ahead of Fed

A fresh one-month high proves difficult to extend for AUD/USD after strong Australian CPI data.
Safe-haven USD demand, supported by geopolitical risks and Fed rate-hike expectations, limits the pair’s advance.
With the FOMC decision in focus, the technical picture appears to favour AUD/USD bulls.

AUD/USD trades around 0.7030. The pair is up just over 0.10% on the day, maintaining a positive bias for a second consecutive session. It has nevertheless surrendered some of the intraday advance that took it to a fresh one-month high during Wednesday’s Asian session following strong Australian consumer inflation data.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

September’s headline Consumer Price Index (CPI) rose to 4.3% YoY from 4.0%, the Australian Bureau of Statistics (ABS) reported. Annual trimmed mean inflation also stayed above the Reserve Bank of Australia's (RBA) 2-3% target. The figures reinforced expectations of an imminent RBA interest rate increase in November, giving the Australian Dollar (AUD) a solid boost. The advance in AUD/USD remains constrained, however, by broad US Dollar (USD) strength as traders await the conclusion of the two-day FOMC meeting.

Inflation concerns linked to elevated energy prices appear to have convinced investors that the US Federal Reserve (Fed) will maintain its hawkish stance at the upcoming meeting and increase borrowing costs again by year-end. Fears of a further escalation in Middle East tensions are also keeping the geopolitical risk premium in place. Together, these factors have lifted the safe-haven Greenback for a fourth consecutive day to a two-week high, limiting further gains in AUD/USD.

Above the 38.2% Fibonacci retracement of the September-October decline, spot prices continue to show a positive bias. The Moving Average Convergence Divergence (MACD) is now positive and above its signal line, while its positive histogram is widening. At 53.7, the Relative Strength Index (RSI) also points modestly upwards, suggesting that selling pressure is easing. Bulls should nevertheless remain cautious, as AUD/USD has been unable to extend its move above the 100-day Exponential Moving Average (EMA).

Further upside would require a sustained break and acceptance above the 100-day EMA. That would support a move towards the 50.0% retracement at 0.7066, followed by the 61.8% level at 0.7106. Beyond those levels, resistance stands at 0.7164 and the swing high of 0.7238. Initial downside support lies at the 38.2% Fibonacci retracement of 0.7025, followed by the 23.6% level at 0.6975. A steeper decline would bring the structural anchor near 0.6893 into view.

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

AUD/USD: daily price chart

Fed: key questions answered

Federal Reserve policy: what is its role and its effect on the US Dollar?

The Federal Reserve (Fed) sets US monetary policy with a dual mandate: price stability and full employment. Adjusting interest rates is its main means of pursuing these objectives. If prices increase too rapidly and inflation exceeds the Fed’s 2% target, the central bank raises interest rates. Higher borrowing costs across the economy make the US more attractive to international investors seeking a place for their funds, strengthening the US Dollar (USD). Conversely, inflation below 2% or an excessively high Unemployment Rate may prompt the Fed to cut interest rates to stimulate borrowing. Such a move weighs on the Greenback.

Eight meetings a year: how does the Fed decide monetary policy?

Economic conditions are reviewed and monetary policy decisions taken by the Federal Open Market Committee (FOMC) at the Federal Reserve’s (Fed) eight policy meetings each year. Twelve Fed officials participate: all seven Board of Governors members, the president of the Federal Reserve Bank of New York, and four of the other eleven regional Reserve Bank presidents. The latter serve rotating one-year terms.

Quantitative Easing (QE): how does it affect USD?

When circumstances are extreme, the Federal Reserve may use Quantitative Easing (QE) to substantially expand the flow of credit through a stalled financial system. This unconventional policy is deployed during crises or periods of exceptionally low inflation. During the Great Financial Crisis in 2008, it was the Fed’s preferred tool. Under QE, the Fed prints additional Dollars to purchase high-grade bonds from financial institutions. The policy typically weakens the US Dollar.

Quantitative Tightening (QT): what does it mean for the US Dollar?

To reverse QE, the Federal Reserve uses Quantitative tightening (QT): it stops purchasing bonds from financial institutions and no longer reinvests the principal from maturing bond holdings in new bonds. This process generally supports the US Dollar’s value.