The Australian Dollar (AUD) rebounded near the 0.7110s area against the US Dollar (USD) on Thursday, recovering over 0.40% after recent losses driven by expectations of a hawkish Federal Reserve (Fed) stance [1]. This move followed the Fed's unanimous decision to raise its benchmark rate by a quarter point to a range of 3.75% to 4.00%, marking its first increase since 2023. Fed Chair Kevin Warsh indicated that another rate hike could occur before year-end, emphasizing that inflation 'is too high and has been for too long,' a message typically supportive of the US Dollar [1].
However, the US Dollar softened instead of strengthening, partly due to political developments. Shortly after the rate hike, US President Donald Trump publicly called for the Fed to slash rates to '1% or less' and urged for rapid action, despite expressing continued support for Warsh. This open disagreement between the White House and the central bank diminished the Dollar's rate advantage [1].
Wall Street stabilized on Thursday, with the S&P 500 edging higher and the Nasdaq climbing, as Warsh's firm stance on inflation reassured investors following a previous day of heavy selling. Improved risk appetite supported the Australian Dollar, which also benefited from a sharp rally in Gold prices, with the metal rising above $4,360 per troy ounce. Higher metals prices typically bolster commodity-linked currencies like the AUD [1].
On the economic data front, US Initial Jobless Claims fell to 196,000 last week, below the expected 208,000, signaling a still-tight labor market that supports the Fed's hawkish position [1]. Technical analysis shows AUD/USD trading at 0.7120, maintaining a bearish near-term bias as it remains below both the 20-period SMA at 0.7123 and the 100-period SMA at 0.7173. Resistance levels are noted at 0.7123 and 0.7127, with stronger resistance at 0.7173, while support is seen at 0.7118, 0.7106, and 0.7092 [1].
CONCLUSION
The Australian Dollar's rebound reflects a complex interplay of Fed policy, US political tensions, and commodity price movements. While the Fed's hawkish stance and strong labor data support the US Dollar, political friction and improved risk sentiment have favored the AUD in the short term. Technical indicators suggest the pair remains under pressure, with rallies likely capped below key moving averages.