The AUD/USD currency pair traded 0.16% lower at approximately 0.7175 during the European session on Tuesday, as the US Dollar outperformed its major peers ahead of the Federal Reserve's two-day monetary policy meeting, which is set to begin later in the day [1]. The US Dollar Index (DXY), which measures the Greenback against six major currencies, was up 0.2% near 98.70 at press time [1]. The US Dollar showed the strongest gains against the Swiss Franc, rising 0.56%, and also posted gains against the Australian Dollar, which fell 0.20% versus the Greenback [1].
Investors widely expect the Federal Reserve to keep interest rates unchanged for the third consecutive meeting, while likely warning of upside inflation risks due to elevated oil prices [1]. Meanwhile, the Australian Dollar is trading broadly higher ahead of the release of Australia's Q1 Consumer Price Index (CPI) data, scheduled for Wednesday [1]. Market estimates suggest that Australian inflation grew strongly by 4.1% year-on-year, compared to the previous reading of 3.6% [1]. If the data confirms accelerating inflationary pressures, it could prompt expectations of another interest rate hike by the Reserve Bank of Australia (RBA) at its May policy meeting [1]. In March, the RBA raised its Official Cash Rate (OCR) by 25 basis points to 4.1% [1].
From a technical perspective, AUD/USD remains above its 20-day exponential moving average (EMA) at 0.7107, indicating a bullish near-term bias and underlying demand on shallow pullbacks [1]. The Relative Strength Index (RSI) is at about 61, suggesting that upside momentum is intact even as the price consolidates near recent highs [1]. Immediate support is seen at the 20-day EMA, with a daily close below this level potentially opening the door to a deeper correction toward the psychological level of 0.7000 [1]. On the upside, a decisive break above the multi-year high of 0.7222 could see the pair approach 0.7300 [1].
CONCLUSION
The AUD/USD pair is under mild pressure as the US Dollar strengthens ahead of the Federal Reserve meeting, but remains technically supported above key levels. Upcoming Australian CPI data is a key focus, with stronger-than-expected inflation likely to fuel expectations of further RBA tightening. Market participants are closely watching both central bank signals and inflation data for the next directional move.