Aussie Dollar Rebounds Despite Strong US Dollar and Iron Ore Decline

The Australian dollar (AUD) has shown resilience in recent days, rebounding despite the ongoing strength of the US dollar. The AUD/USD pair climbed to 0.6970, slightly above last week's low of 0.6903. This price action comes ahead of the Federal Reserve's release of minutes from its last meeting, which could influence market sentiment.

The US dollar index (DXY) reached 102.53, its highest level since April 2023, continuing a rally that began in August. Meanwhile, the price of iron ore, Australia's largest export, has dropped nearly 9% in the past month due to weak Chinese demand. Despite these challenges, the Aussie has found support from recent actions by the Reserve Bank of Australia (RBA) and macroeconomic data.

The RBA raised interest rates by 0.25% last week, marking its fourth hike of the year. Additionally, Australia's inflation, as measured by the Consumer Price Index (CPI), rose to 4.0% in August from 3.5% the previous month, further distancing itself from the RBA's 2% target. Market participants anticipate another rate hike by the RBA this year.

In contrast, the Federal Reserve's chances of raising interest rates have diminished following weak US economic data. The economy added only 29,000 jobs in September, and the unemployment rate rose to 4.2%. Inflation, as measured by the PCE index, also eased in August.

Technically, the AUD/USD pair has been in a downward trend after peaking at 0.7238 in September. It has recently attempted a rebound but remains below key technical indicators, suggesting that bears may still be in control. The pair could potentially resume its downward trend, targeting this month's low of 0.6900.