The AUD/USD currency pair reversed earlier gains on Monday, trading around 0.7123 after reaching an intraday high of 0.7140, as a broadly firmer US Dollar and hawkish Federal Reserve expectations capped the upside [1]. Despite this, underlying support for the Australian Dollar remains due to market expectations that the Reserve Bank of Australia (RBA) could deliver another rate hike, limiting a deeper decline [1]. The RBA has already implemented three 25-basis-point rate hikes since the start of the year, raising the cash rate to 4.35%. The central bank is widely expected to raise rates by another 25 bps on September 29, as inflation continues to exceed its 2%-3% target range [1].
Meanwhile, the Federal Reserve raised interest rates last week, lifting the federal funds rate to 3.75%–4.00%, and signaled the possibility of another increase by year-end [1]. If the RBA raises rates again later this month, the policy gap between Australia and the United States would widen, potentially giving the Australian Dollar a relative yield advantage [1].
Technical analysis indicates that the path of least resistance for AUD/USD remains tilted to the upside, as the pair holds above key daily Simple Moving Averages, reinforcing a bullish structure [1]. However, momentum is mixed, with the Relative Strength Index (RSI) near a neutral 48 and the Moving Average Convergence Divergence (MACD) slipping slightly into negative territory, suggesting waning upside pressure rather than a completed topping pattern [1]. Initial support is noted around the 38.2% Fibonacci retracement at 0.7095 [1].
The US Dollar was the strongest against the Japanese Yen, with a 0.38% gain, while its move against the Australian Dollar was marginal at 0.02% [1].
CONCLUSION
The AUD/USD pair remains supported by expectations of further RBA rate hikes, despite mixed momentum and a stronger US Dollar. Technical indicators suggest a bullish bias, but upside pressure is waning. Market participants are watching upcoming central bank decisions for further direction.