Aussie Dollar Recovers Amid Strong US Dollar and RBA Rate Hike

The AUD/USD pair has shown signs of recovery in recent days, despite challenges such as the strengthening US dollar. The pair climbed to 0.6970, slightly above last week’s low of 0.6903. This movement comes ahead of the Federal Reserve’s release of the minutes from its latest 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 demand from China. Despite these headwinds, the Australian dollar has found support from the Reserve Bank of Australia’s (RBA) recent interest rate hike and rising inflation.

The RBA increased interest rates by 0.25% last week, marking its fourth hike of the year. Data also showed that Australia’s inflation, measured by the Consumer Price Index (CPI), rose to 4.0% in August, up from 3.5% the previous month. This suggests the RBA may raise rates again soon. In contrast, the Federal Reserve’s likelihood of a rate hike has decreased following weak US jobs data and easing inflation figures.

Technical analysis indicates that the AUD/USD pair remains in a downward trend after peaking at 0.7238 in September. The pair has struggled to break above key resistance levels, including the 50-period moving average and the Value Area Low of 0.7027. Analysts suggest the pair could resume its decline, potentially reaching this month’s low of 0.6900.