AUD/USD Hinges on Fed Rate Shifts and Technical Breakouts

The AUD/USD pair is facing a critical test this week as shifting Federal Reserve rate hike expectations influence its movement. After a softer-than-expected U.S. September jobs report, bets for an October rate hike have dropped significantly, falling from 70% to just 24%. This has weakened the U.S. dollar, providing some relief for the Australian dollar, which has started a cautious countertrend move higher.

With little economic data scheduled for release this week, the AUD/USD pair’s next move could be driven by developments in the Middle East and short-term technical factors. The pair has been trading within an ascending triangle pattern, which often signals a bullish reversal upon a breakout. The relative strength index (RSI) has also climbed back above its neutral threshold, indicating improving price momentum.

A decisive breakout above the ascending triangle could push the pair toward the 0.7005 level, with further resistance near 0.7045. Conversely, a breakdown below the lower trendline of the triangle could see the pair retest the 0.6930 level, with a potential decline toward 0.6905 if this support fails. Traders will be closely watching these levels to gauge the pair’s next directional move.

While the Federal Open Market Committee (FOMC) minutes scheduled for Wednesday may provide some insight, the AUD/USD’s price action is likely to be more influenced by external factors such as geopolitical developments and technical sentiment. Given the lack of major economic data, risk sentiment could play a more significant role in determining the pair’s near-term direction.