Below 0.6850: Australian Dollar eases as Fed-RBA policy gap widens

• 0.27% decline takes AUD/USD below 0.6850 despite upbeat market sentiment.
• 87% probability now assigned to a 25-basis-point Fed rate rise in December.
• With RBA tightening expected to pause, markets price in rate cuts for 2027.

AUD/USD fell 0.27% on Wednesday. The Australian Dollar weakened against the US Dollar as traders priced in additional Federal Reserve tightening, with few economic releases scheduled in either Australia or the US. The pair trades below 0.6850.

Below 0.6850: AUD/USD losses deepen as sticky US inflation bolsters Fed hike bets

US equities are recording strong gains, keeping market sentiment upbeat. In currency trading, the US Dollar Index (DXY) is up 0.67% at 102.91, having eased from an 18-month peak of 102.96. The index measures the dollar against a basket of six currencies.

Tuesday’s hawkish comments from Federal Reserve (Fed) officials helped lift the US Dollar. Fed Governor Christopher Waller had indicated that a 0.3% rise in core CPI could lead him to back a 50-basis-point rate increase. The subsequent release met that condition.

October marked the third consecutive month in which underlying inflation rose 0.3% MoM. Headline CPI climbed 0.4% MoM, slowing from 0.6% but exceeding the 0.3% forecast.

According to the CME FedWatch Tool, money markets assigned an 87% probability to a 25 bps rate increase. A larger 50 bps Fed hike carried a slim 13% probability.

Against this backdrop, AUD/USD is drifting lower as traders speculate that the Reserve Bank of Australia (RBA) has completed its tightening cycle and will leave rates unchanged for the foreseeable future. Prime Terminal data show expectations for 28 basis points of RBA rate cuts in 2027.

Australia’s next releases include November Consumer Inflation Expectations. The October reading was 5.3%, compared with 4.9% in September.

Thursday brings US Initial Jobless Claims, housing figures and Fed speeches. Investors will then turn to Friday’s Producer Price Index (PPI).

0.6844: AUD/USD price forecast and technical outlook

At 0.6844 on the daily chart, AUD/USD retains a bearish short-term bias. Spot remains well below the cluster of simple moving averages (SMA) near 0.7028 and several former rising trend lines that now form overhead resistance. A breach of the latest rising support line, now resistance around 0.6926, highlights continuing downward pressure. The Relative Strength Index (14), at roughly 35, signals weak momentum without yet reaching oversold territory. Sellers therefore retain control unless the pair recovers those broken structural levels.

Around 0.6926, the former rising trend line provides the first upside resistance. Beyond it lies the convergence of the 50-, 100- and 200-day SMAs near 0.7028. Only a daily close above this zone would relieve immediate selling pressure and clear a path towards 0.7135, followed by horizontal resistance at 0.7198. Firm structural support on the downside lies much lower, around 0.6343, where the long-term descending trend line has become a base. While the pair stays below the resistance cluster, it remains exposed to a continued gradual decline.

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